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© 2011 The Advisory Board Company • www.advisory.com The Advisory Board Company Marketing and Planning Leadership Council A Business Model in Transition Building a Dynamic Leadership Structure Re-Designing Care Processes for Value Blueprint for Service Line Transformation 1

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Page 1: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com

The Advisory Board Company

Marketing and Planning Leadership Council

• A Business Model in Transition

• Building a Dynamic Leadership Structure

• Re-Designing Care Processes for Value

Blueprint for Service Line Transformation

1

Page 2: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com

Table of Contents

2

Executive Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Essay: A Business Model in Transition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Building a Dynamic Leadership Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

I. Elevating Administrative Leadership . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

II. Partnering with Physicians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

III. Promoting Multidisciplinary Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

IV. Building a Chronic Care Infrastructure . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

V. Managing Service Lines to System Level . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Re-Designing Care Processes for Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

VI. Beginning the Process of Care Standardization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

VII. Creating a Patient-Centered Focus with Multidisciplinary Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

VIII. Directing Patients to “Right” Site of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

IX. Formalizing Relationships with Post-Acute Care . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

X. Exercising Caution with Service Line-Specific Prevention Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

XI. Waiting for National Registries Before Pursuing Long-Term Outcomes Tracking . . . . . . . . . . . . . . . . . . 76

Page 3: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com

Executive Summary

3

The Argument for Service Line Transformation

The service line has long served as an apt organizational model for growing profitable volumes within a fee-for-service payment system. Under service line management, hospitals and health systems assign strategic oversight over high-growth, high-profit business units, such as cardiovascular services, oncology, and orthopedics. To maintain these profitable growth engines, organizations charge service line leaders with assessing growth opportunities, planning capital needs, and competing for volume.

Emerging risk-based payment models promise to change the strategic value of service lines. The Patient Protection and Affordable Care Act prompts the Centers for Medicare and Medicaid Services to experiment with a number of new reimbursement methodologies across the next decade. Models such as value-based purchasing, readmissions penalties, bundled payments, and shared savings hold hospitals increasingly accountable for the quality, cost, and utilization of health care services. Health care reform aims to shift hospitals’ core incentives away from the pursuit of high-profit, acute care procedures, and toward efficient, coordinated care and ambulatory management.

Although primarily designed for growth, service lines will be critical in helping hospitals and health systems move from volume- to value-based incentives. However, the service line model as it exists today will require fundamental change to meet these new challenges. The goal of service line transformation, then, is to create a new infrastructure capable of assuming risk and ultimately generating returns under new payment models. To prepare service lines for new payment models, hospitals and health systems will need to address four key areas:

• Service Line Organization: Building a Dynamic Leadership Structure. The service line leader job description will be re-written to prioritize care coordination across the continuum; minimize cost, quality, and utilization risk; address chronic care shortfalls; and elevate the patient experience.

• Care Processes: Re-Designing Care Processes for Value. The ballooning Medicare population will prompt hospitals to identify new efficiencies. Slimmer margins and risk-based payment will require institutions to deliver the most appropriate care in the most appropriate setting.

• Product Strategy: Mitigating the Risk of Accountable Care. Risk-based payment will shift service line strategy toward ambulatory, rather than inpatient, investment. Given the risk associated with new facilities and technologies, organizations must consider the impact of accountable care on investments today, prioritizing products beneficial under both fee-for-service and risk-based payment models.

• Growth and Marketing: Moving to Compete Upstream. Traditional concepts of growth and competition will evolve as hospitals accept more population and utilization risk. Increasingly, institutions will need to ensure that volumes are “appropriate,” requiring service lines to compete more upstream and grow disease-based market share.

Conversion to risk-based payment will not occur overnight—most hospitals and health systems will continue to operate in a fee-for-service environment well into the future. As such, service line transformation must occur in lockstep with payment transformation. Still, many of the imperatives outlined in this publication will serve organizations well under multiple payment models, and also prepare hospitals’ growth infrastructure for emerging risk-based challenges.

This publication contains our initial research on service line transformation, detailing new imperatives for service line leadership and value-based care re-design in light of emerging risk-based payment models. This volume profiles strategies for strengthening administrative and physician leadership, promoting multidisciplinary care, leveraging service lines to hardwire evidence-based medicine, and pivoting service lines to a more patient-centric focus.

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© 2011 The Advisory Board Company • www.advisory.com 4

A Business Model in Transition

Page 5: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 5 Source: Marketing and Planning Leadership Council interviews and analysis.

The Patient Protection and Affordable Care Act will introduce a number of experiments with risk-based payment across the next several years. Such payment models include value-based purchasing, bundled payments, readmissions penalties, and shared savings.

These models represent a potential shift away from a fee-for-service framework and toward reimbursement systems that hold providers accountable for cost, quality, and utilization. The shared savings model in particular overturns fee-for-service volume incentives by rewarding providers for reducing inappropriate utilization—and potentially penalizing those that do not.

Regardless of whether institutions decide to pursue individual Medicare programs like Shared Savings in the near term, all hospitals likely face the challenge of adapting to accountable care over the long term.

Evolution to Accountable Payment Environment

Preparing to Navigate Divergent Payment Models

Revenue Generated Through Payment

Model

Time

Secure strategic alignment with physician partners

Fee for Service

Total Cost Accountability 100%

0%

Create platform for joint contracting

Standardize care processes

Elevate focus from unit cost to total cost

Accelerate demand destruction

Leverage strategy-aligned physician incentives

Deploy robust performance management process

Laying the Foundation for Accountable Care

Executing a Risk-Based Strategy

Page 6: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 6 Source: Marketing and Planning Leadership Council interviews and analysis.

The prospect of increased provider risk poses a distinct challenge for the service line model. Service lines were created as a clinical organizing principle in part to facilitate growth of profitable volumes under the fee-for-service payment system. Under service line management, hospitals and health systems assign strategic oversight over high-growth, high-profit business units, such as cardiovascular services, oncology, and orthopedics. Service line leaders are charged with identifying new products, assessing the competitive landscape, and growing those favored business units.

Principles of “Fee-for-Service” Service Line Management

Service Lines Designed to Grow Profitable Volumes

Primary Functions

Secondary Functions

Service Line Leader

• Business development • New product identification • Service line-specific strategic planning

Marketing

Service line marketing campaigns/ materials

Physician Alignment

Relationships with proceduralists and referrers

Quality Improvement

Quality initiatives

Finance & Budgeting

Budgeting and fiscal oversight

Materials Management

Supply cost containment

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© 2011 The Advisory Board Company • www.advisory.com 7 Source: Marketing and Planning Leadership Council interviews and analysis.

1 Pseudonym.

Percentage of Hospital Discharges

Inpatient, 2010

Percentage of Hospital Profits

Inpatient, 2010

Under the fee-for-service system, a handful of service lines, such as cardiovascular services, orthopedics, oncology, neurosciences, and diagnostic imaging provide critical financial stability for hospitals and health systems. In particular, favorable payment rates for high-growth procedures, many of them inpatient surgeries, provide hospitals with a crucial cross-subsidy that helps to offset lower-paying medical discharges.

Surgical Cases Provide Outsized Profit

Marquee Service Lines Keeping Everything Else Afloat

73% 27%

Medical DRGs

Surgical DRGs

54% 46%

Medical DRGs

Surgical DRGs

The Few Supporting the Many

“For our health system, 80 percent of our contribution profits come from our cardiovascular procedures and advanced imaging….Finding most of your profit in two or three services—I think you’d find that in almost every hospital, that’s not unique to us.”

President Taylor Health System1

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© 2011 The Advisory Board Company • www.advisory.com 8

Source: Marketing and Planning Leadership Council interviews and analysis.

Although primarily designed for growth, service lines will be critical in helping hospitals and health systems move from volume- to value-based incentives. Just as the service line provided organizations with a platform for coordinating investment and growth strategies, under fee-for-service, the model can also be used to organize initiatives to manage risk.

Hospital administrators expect service lines to continue to play an important role in strategic plans. In fact, many organizations view the service line model as helpful for advancing goals for emerging areas of strategic importance such as primary care and geriatric medicine.

Percentage of Respondents Ranking Service Lines of High Importance

Betting on Continued Relevance of Service Lines

“Marketing and Planning Transformation Readiness Audit,” 2010

n=70

82% 76%

53% 44%

70%

23%

48%

23%

83% 71%

54% 49%

77% 70%

84%

49%

Cardiovascular Services

Orthopedics Back/Spine Care

Neurosciences Oncology Wellness & Preventative

Medicine

Primary Care Geriatrics

Now In Five Years

“The Old Standbys” “The New Arrivals”

Page 9: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 9 Source: Marketing and Planning Leadership Council interviews and analysis.

1 Pseudonym.

However, the service line model as it exists today will require fundamental change to serve as an effective vehicle for managing performance risk. To reposition current service lines for value, hospitals will need to broaden service line scope to better orient care across the full course of the disease.

At present, service lines focus on acute care while limiting attention to pre- or post-acute services, a byproduct of fee-for-service incentives. New payment models place hospitals at greater risk for upstream and downstream care of patients, which will require a significant expansion of service line purview.

Service Line Purview to Expand Across Continuum

Requiring Broader Scope of Oversight

Scope of the Service Line

Service Line Leader

Preventive Care

Screenings Ambulatory

Clinics Acute Care

Post-Acute Care

Home Care/ Chronic Care

Today’s service line purview

Not (Yet) Centered Around Patients

“Service lines are meant as a way to position products to consumers–but because they’ve been hospital-based, they've not really been designed as the way that consumers actually consume health care.”

CEO Donnis Health Care1

Page 10: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 10 Source: Marketing and Planning Leadership Council interviews and analysis.

Service line transformation refers to the process of preparing key clinical departments for risk-based payment. Given that CMS and most commercial insurers are only now beginning to test new reimbursement systems, it will be critical for hospitals and health systems to evolve their service lines in lockstep with payment transformation. However, given the length of time likely required to prepare service lines to take on more risk, providers should begin laying the groundwork for accountable care within key service lines today.

First, organizations need to prepare service line leaders for additional competencies as the scope of service lines broadens. Next, service line administrators and physician leaders must spearhead efforts to rebuild care processes to maximize value. As accountable payment adoption increases, service lines must re-prioritize the product portfolio to emphasize technologies and services that elevate value and appropriateness. Finally, market strategy must be overhauled to compete for ambulatory visits and disease-based share, bringing patients into the system upstream from acute care.

Blueprint for Service Line Transformation

Today’s Publication: Staging the Evolution of Service Lines

Deg

ree

of

Tra

nsf

orm

ati

on

Leadership Structure

Value-Based Care Delivery

Product Strategy

Growth Strategy

“Laying the Foundation for Accountable Care” “Executing a Risk-Based Strategy”

Time

•Service line scope expands to new sites of care and chronic diseases

•Leadership role moves beyond driving growth

•Care standardization eliminates variation, improves quality

•Pathways designed around patients rather than specialists

• Investment in high-cost technologies slows

•Cost-lowering and/or chronic care, investments rise in priority

•Focus shifts from volume growth to disease-based market share growth

•Marketing efforts highlight value to key stakeholders

Page 11: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 11

Building a Dynamic Leadership Structure

Page 12: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 12 Source: Marketing and Planning Leadership Council interviews and analysis.

Effective service line leadership has always been important. In the future, its importance will only grow as service line administrators’ responsibilities expand in magnitude and variety. Service line infrastructure will be equally integral to achieving future service line goals. While the scope of service lines traditionally centers on acute care procedures, service line transformation requires extending the scope both upstream and downstream. To accomplish this, organizations need to plan to create multidisciplinary forums, address chronic care, and organize more deliberately at the system level. This section provides an overview to laying the foundation for this transformation of service line leadership and infrastructure.

Key Imperatives for Improving Service Line Leadership

Building a Dynamic Leadership Structure

1 Elevating Administrative Leadership • Ensure service line leader skills adequate for role under new payment models • Create strong medical director position to facilitate physician behavior change

3 Promoting Multidisciplinary Care • Align medical and surgical specialists for clinical improvements and cost reductions • Involve community (primary care) physicians in strategic efforts

2 Partnering with Physicians • Narrow alignment efforts to prioritize relationships with high-value specialists • Select alignment strategy on a specialty basis to optimize physician incentives

4 Building a Chronic Care Infrastructure • Assign chronic disease responsibility to service line leaders • Encourage cross-service line collaboration to better manage chronic disease

5 Managing Service Lines to System-Level • Deliberately select service lines and their functions to elevate • Maintain sufficient local autonomy to preserve entrepreneurship

Page 13: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 13 Source: Marketing and Planning Leadership Council interviews and analysis.

I. Elevating Leadership

Historically, service line leaders have focused on the financial success of the service line, building relationships with physicians and ensuring best-in-class performance. As risk-based payment models become more prevalent, those responsibilities will still be critical. However, service line leaders will be required to take on additional responsibilities as performance risk increases. Additional responsibilities likely will include building partnerships with post-acute providers and managing chronic disease and population health.

Service Line Leader Responsibilities Only Growing Under New Payment Models

Managing Risk Requires New Service Line Competencies

Changing Role of Service Line Administrators

New Business Development and Volume Growth

Physician Alignment

Hospital-Based Quality (Core Measures)

Partnership Building

Long-Term Patient Outcomes

Patient Satisfaction

Population Health

Budgeting, Cost, and Operational Efficiency

Traditional Responsibilities

New Responsibilities

Change Management

Prevention

Sha

red

Sa

vin

gs

FFS

Ris

k-B

ase

d P

aym

ent

Tool in Brief: Your New Service Line Priorities

• Poster available to members of the Marketing and Planning Leadership Council

• Documents service line priority changes related to shift from volume-based to value-based incentive structures

Page 14: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 14 Source: Marketing and Planning Leadership Council interviews and analysis.

As providers take on more risk, executives will need to assess service line leaders’ capacity to handle shifting responsibilities. Some will have the requisite strategic skills but need support if their day-to-day role is currently consumed by operations. Others will excel at operations but may not be capable of leading a complex transition. Even the most dynamic service line leaders will require training, new job descriptions, and incentive plans to help them navigate change.

Assessing Service Line Leader Competency

Evaluating Service Line Leaders’ Aptitude for New Role

Required Competencies

Strategic: Goal 85/100

1. Provide input for system-wide strategic

plan

2. Collaborate with payers/employers on

health engagement

3. Participate in clinical integration meetings

Operational: Goal 80/100

4. Assist in developing and implementing

quality and service standards

5. Support service line goals by tracking

service line effectiveness, i.e., financial

return, market share, customer satisfaction,

clinical outcomes

6. Develop methods to monitor customer

satisfaction and customer needs related to

the service line

Change Management: Goal 90/100

7. Act as change agent for the service line

8. Regularly assess regulatory and reform

changes that impact service line

Service Line Leader Performance Assessment

Hire Above

Hire Below

Replace Train

Hire Above

Hire Below

Replace Train

Ortho Admin CV Admin

Neuro Admin

Hire Above

Hire Below

Replace Train

Strategy: 35/100 Operational: 92/100 Change Mgt: 70/100

Strategy: 87/100 Operational: 62/100 Change Mgt: 90/100

Strategy: 85/100 Operational: 87/100 Change Mgt: 57/100

Backfil l ing to Allow Focus on Highest Priorities

“The current structure makes it difficult to identify the most appropriate executive profile to lead service lines under the accountable care model. Ideally, these individuals would have the appropriate backfill on the management side, so that they can concentrate on strategy, integration of services, new growth, and population health management.”

VP of Strategic Planning

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© 2011 The Advisory Board Company • www.advisory.com 15

Source: 2007 Health Care Advisory Board Service Line Leader Survey; Marketing and Planning Leadership Council interviews and analysis. 1 2007.

Compensation models for service line leaders may also require readjustment in light of new payment incentives. Service line leaders will need to be held accountable for improving the value of care provided in their respective areas. For the half of service line leaders whose compensation is tied to performance, the metrics for determining compensation should be reevaluated. Incentives should prioritize clinical quality and patient satisfaction in ways that align with new payment incentives. All organizations should determine whether new metrics (e.g.-appropriateness of utilization, cost reductions, etc.) measure service line leader effectiveness under the new model and should thus play a role in holding administrators accountable.

Service Line Leader Compensation Packages Require Increased Incentives for Value

Directing Incentive Pay Toward New Competencies

86% 82%

71%

53% 44%

23% 15%

Breakdown of Performance Metrics

n=62

51% 49%

Proportion of Service Line Leaders Eligible for Performance Bonus1

n=203

No Bonus

Bonus

“At Risk” Compensation for Service Line Leaders

“Our service line leaders will be increasingly incentivized based on patient-centric, quality of care indicators. Our Medical Directors, for example, were paid according to how many hours they worked, not what they produced. Now, their compensation has an at-risk component.”

VP, Strategic Planning and Business Development

Page 16: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 16 Source: Marketing and Planning Leadership Council interviews and analysis. 1 Chief Medical Officer.

An organization’s ability to change physician behavior will determine success under new payment models, and physician leadership will be pivotal for facilitating such change. Service line transformation will not be possible without medical directors responsible for creating a culture that values high-quality, appropriate care.

The ideal service line organizational structure includes a physician leadership position, often in the form of a dyad model–a specialist collaborating in tandem with an administrative leader. But as clinical risk turns into financial risk, some institutions are elevating medical director roles in new models, including:

• A triad structure with both medical and surgical specialists serving as co-chairs

• Disease-based medical directors who encourage multidisciplinary, standardized care across specific disease pathways

• A physician with business acumen at the service line’s helm, supported by administrative leadership.

Strengthening Role of Medical Director Facilitates Transformation

Elevating Importance of Physician Leadership

Three Roles of Service Line Medical Directorships

“The Strategic Partner” “The Pathway Czar” • “The Service Line CMO1”

• Administrator and physician jointly oversee service line

• Physician focuses on alignment and clinical improvement; administrator focuses on budgeting and strategy

• Multiple medical director roles created within each service line along disease states

• Each medical director focuses on clinical pathways and alignment for assigned disease state

• Entire service line overseen by a single physician, whose compensation includes at-risk component for meeting service line goals

• Focuses on administration, limited clinical practice

Encourages physician involvement in strategic opportunities; some providers bring in medical and procedural physicians into triad structure

Creates leadership infrastructure to spearhead standardization efforts; bridges gap between specialists for certain disease states

Promotes physician buy-in in administrative infrastructure and facilitates strategic change from volumes to value

Dyad Structure Disease-Based Physician-Owner

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© 2011 The Advisory Board Company • www.advisory.com 17 Source: Marketing and Planning Leadership Council interviews and analysis.

II. Partnering with Physicians

Poor physician performance will have direct financial consequences under accountable care. Therefore, institutions should seek to partner only with those physicians who demonstrate a commitment to high-quality, efficient care. By utilizing cost and quality benchmarks, institutions should analyze and segment physician performance, creating stronger loyalty with top-performing physicians.

Not all Physicians Create Equal Value

Prioritizing Quality Over Quantity in Alignment Strategy

Physician Alignment Prioritization Matrix

Loyalty Weak Strong

Per

form

an

ce

Low

Va

lue

Hig

h V

alu

e

“Superstar”

“Nice but Unmotivated”

“Strong but Stubborn”

“Disengaged”

Woo Commit

Not Meant to Be Shape Up or Ship Out

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© 2011 The Advisory Board Company • www.advisory.com 18 Source: Marketing and Planning Leadership Council interviews and analysis.

The more risk a given specialist’s performance places on the system, the tighter the required alignment. But even in an accountable care organization, stronger loyalty does not necessarily require full employment. Common strategies for specialist alignment include:

• Continue to allow physicians to operate independently. While the least intrusive option, this strategy will make it more difficult to reward or reprimand physicians for performance.

• Selectively create separate performance-based contracts. Professional services agreements and co-management models allow stable practices to remain in private practice, but receive rewards for high performance.

• Enter into a risk-based entity through either Clinical Integration or employment. Formalizing relationships with physicians allows the hospital the greatest control over physician behavior, but also places most of the risk of poor performance on the hospital’s shoulders.

Performance-Based Contracts Align Incentives for Value, Minimize Risk

Alignment Not Necessarily Equaling Employment

Specialist-Hospital Relationship Options in Accountable Care

Include in Risk-Bearing Organization

Enter Into Separate Performance-Based

Contracts

Function Independently

Hospital maintains minimal relationships with physicians outside risk-bearing entity

Degree of Financial Integration High Low

Hospital forms performance-based relationships with physicians outside context of risk-bearing entity

Hospital includes all interested physicians in risk-bearing entity

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© 2011 The Advisory Board Company • www.advisory.com 19

Source: Marketing and Planning Leadership Council interviews and analysis.

Increasingly, specialists are looking to align with hospitals due to market uncertainty. It is important to recognize the strategic goals of the organization as well as the impact of risk-based payment when pursuing more formal alignment, and choose the appropriate model for each individual specialty.

Certain payment models will place more risk on cost and quality of care, and this risk will have a disproportionate impact for certain specialists. For example, value-based purchasing will heighten risk of core measure performance, but initially only certain specialties, such as cardiology, will be at risk. Bundled payments place greater risk on use of high-cost devices, making specialists with high-device usage, such as orthopedists and cardiologists, a first-tier alignment priority for many organizations.

Case for Alignment Strongest for Cardiology, Orthopedics

Emerging Payment Models Forcing New Alignment Priorities

Assessment of Alignment Need by Selected Service Lines

Orthopedics Neurology Neurosurgery Cardiology Cardiac Surgery

Efficiency

Call Coverage

Device Spend

Growth & Volume

Multidisciplinary Collaboration

Regulation-Based Quality

Tight Alignment Necessary

Little Alignment Necessary

Moderate Alignment Necessary

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© 2011 The Advisory Board Company • www.advisory.com 20

Source: HealthLeaders Intelligence, “Physician Alignment in an Era of Change,” available at: http://content.hcpro.com/pdf/content/256536.pdf, accessed March 22, 2011; Marketing and Planning Leadership Council interviews and analysis.

1 Alignment model is not mutually exclusive; values do not add to 100.

Hospitals are prioritizing alignment with cardiologists and orthopedists given the disproportionate impact of risk-based payments on these specialties. In addition to employment, institutions are turning to performance-based contracts like clinical co-management and paid directorships for cardiologists and orthopedists. Organizations should carefully evaluate alignment options on a specialty-by-specialty basis to identify the option that best balances risk with the benefits of aligned incentives.

Diverse Set of Alignment Mechanisms Across Service Lines

Leverage New Models to Align with Key Specialties

Survey Respondents’ Descriptions of Service Line Alignment Model

n=258

Full Employment

Clinical Co-Management

Volunteer Medical Staff

Paid Directorships

Med Service Organization

Cardiology 36% 13% 53% 49% 5%

Orthopedics 35% 11% 62% 26% 5%

Oncology 32% 7% 52% 24% 4%

Neuroscience 31% 5% 50% 24% 5%

Neurosurgery 32% 6% 45% 17% 5%

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© 2011 The Advisory Board Company • www.advisory.com 21

Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym.

To generate sufficient incentive for specialists to improve quality and reduce costs, some hospitals have created virtual institutes that offer lucrative benefits to specialists in exchange for adhering to performance standards. The requirements of the institute align physician and hospital incentives without requiring full clinical integration or employment. The specialists receive benefits such as preferred scheduling and referral steerage in return for participation. Community hospitals in competitive markets dominated by independent physicians may benefit most from this institute model.

Institute Model Facilitates Development of Quality-Driven Culture

Collaboration as a Prerequisite for Club Membership

Case Studies of the “Exclusive Institute” Model

Program Program Background Criteria for Membership Benefits to Participants

Cardio-Vascular Institute

Celestine Hospital1

• Large community hospital with predominantly independent physicians

• Market has numerous, competitive CV practices

• Board certification

• Adherence to best practice guidelines

• Participate in research

• Attend member meetings

• Engagement in program initiatives

• Assistance with outreach

• Access to reading panels

• Preferred scheduling

Ortho-Neuro

Institute

Adelman Health

Network1

• Three-hospital health system with a mixture of employed and independent physicians

• Established membership-based ortho-neuro institute

• Quality reporting

• Community outreach

• Commitment to ongoing professional education

• Priority access to hospital resources

• Utilization of hospital brand

• Increased referral steerage

Page 22: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 22 Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym.

Institutions aggressively pursuing shared savings incentives and creating accountable care organizations can afford to be more selective with physician partnerships. The tighter referral network in an ACO means primary care physicians can be “choosier,” referring only to those specialists who clearly demonstrate quality and a history of appropriate care.

For example, one health system created strict selection criteria and a separate contract for specialists interested in joining their ACO, including the following conditions:

• Employ a team-based care approach

• Adopt evidence-based care models

• Focus on engaging patients

• Commit to formal data sharing

• Agree to open practice to all ACO enrollees

Criteria Created to Aid in Selection of High-Value Specialists

Setting a Higher Bar for ACO Participants

ACO Participant Selection Grid

Specialist meets the following criteria: CLINICAL QUALITY □ Adopt ACO-defined utilization processes □ Agree to adopt evidence-based care models □ Have “team-based” care managers in practice □ Utilize ACO Disease Management programs □ Participate in peer review and chart audits □ Engage patients and/or families in care

Best

Financial

Performance

Best People

and

Workplace

Specialist Physician H-C

AH

PS

Inpa

tien

t &

Out

pati

ent

cust

omer

ser

vice

sur

veys

(PR

C)

(3 Q

uest

ions

)

Indi

vidu

al C

ontr

ibut

ion

of D

irec

t C

ost

per

Cas

e

Req

uire

d M

eeti

ng

Part

icip

atio

n/A

CO

Com

mit

tee

____

____

__

Effe

ctiv

e C

omm

unic

atio

n

b/t

spec

ialis

t &

PC

P

Spec

ialt

y Q

ualit

y M

etri

c

Inpa

tien

t &

Out

pati

ent

cons

ult

note

sen

t to

PC

P

(w/i

72

hour

s)

Best Quality

and Safety

Best

Customer

Service

• Small health system in the Northeast

• Administrators developing baseline criteria that specialists must meet to participate in ACO

• Hospital reevaluates alignment mechanisms with physicians not willing to meet criteria

Case in Brief: Kasdan Health System¹

PAYOR RELATIONSHIP-BUILDING □ Agree to open practice to all new ACO enrollees □ Meet all Payer-Partner credentialing standards □ Agree to provide utilization, quality measures,

patient satisfaction, chronic disease data to ACO OPERATIONS □ Utilize hospitalist/mid-level providers □ Utilize an EMR and be part of HIE □ Actively maintain physician email

Page 23: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 23 Source: Marketing and Planning Leadership Council interviews and analysis.

With such stringent criteria for ACO entry, sizing the required number of specialists can be a challenge. In a volume-based incentive system, each additional physician performing procedures at the organization helps grow volume, but as the institution accepts more risk, institutions must instead ensure that volumes are concentrated with an appropriate number of high-value physicians. Institutions must balance the need for high-quality, low-cost specialists, with market demand and local physician supply. Ideally, as institutions identify high-value specialists, they can drive referrals to these specialists, increasing the experience and efficiency of these top physicians, allowing the ACO to grow with fewer specialists.

Focusing Referrals Allows High-Value Specialists to Deepen Expertise

Likely Needing Fewer Physicians Than You Think

Cycle of Value Creation for Key Specialists in ACO

Specialist Allocation in a Risk -Based Payment World “Under [risk-based payment]…the best way to manage that is to have few doctors who do the inpatient work, and they are very high volume and very efficient. We can standardize protocol and supply chain management. And we have outpatient doctors who can manage the gateway to the next level of care, and manage and work with the PCPs on chronic disease management.”

VP, Service Lines and Business Development

Identify High-Value Specialists

Increase Specialist Capacity, Referrals

High-Value Specialists Further Deepen Expertise

Increase Specialist Efficiency

Focus Referrals to High-Value Specialists

Page 24: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 24 Source: Cleveland Clinic, Cleveland, OH; Marketing and Planning Leadership Council interviews and analysis.

III. Promoting Multidisciplinary Care

Beyond selecting the right specialists, fostering collaboration between surgical and medical specialists will be paramount to ensure appropriate, evidence-based care. The service line organizational model can be an effective mechanism for bridging the gap between surgical and medical specialists, both within the hospital and in the community. Current service lines will need to broaden the scope of care delivery to focus both on acute episodes and better management of disease across time.

For example, Cleveland Clinic in Ohio restructured its medical staff organization within the cardiovascular space, moving away from the traditional medical/surgical academic department divide and consolidating into a service line-based “institute” model.

Cleveland Clinic Adopting a Multidisciplinary Medical Staff Model

Restructuring Departments Around Service Lines

Division and Department Reorganization

Division of Medicine

Division of Surgery

Department of Cardiology

Department of Cardiac Surgery

Department of Vascular Medicine

Department of Vascular Surgery

Cardiovascular Institute

Department of Cardiac

Surgery

Department of Vascular

Surgery

Department of

Cardiology

Department of Vascular Medicine

Case in Brief: Cleveland Clinic

• 1,000-bed academic medical center in Cleveland, Ohio

• In 2008, restructured medical staff organization into disease- and organ-based institutes led by a physician chair; reorganization dissolved division structure (i.e., medicine, surgery, etc.)

• Departments persist, but are re-mapped to relevant institute; credentialing and privileging decisions remain with departments

• Previously, department chairman recommendations for appointments vetted by division, now decision rests with leader of the institute

• Forums created to preserve cross-institute physician interaction that would be lost otherwise

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© 2011 The Advisory Board Company • www.advisory.com 25 Source: Piedmont Health System, Atlanta, GA; Marketing and Planning Leadership Council interviews and analysis.

1 Centers of Excellence. 2 Cardiovascular operating room.

Some institutions have gone a step further, reconfiguring their service lines as a disease-based model instead of the traditional unit-based design. Piedmont Heart Institute in Georgia created disease-specific centers of excellence to serve as the foundation of the Heart Institute. Each employs a leadership dyad consisting of a physician chief and business development administrator.

Piedmont Integrating Traditional Departments With COEs1

Aligning Medical, Surgical Specialists Along Diseases

Representative Centers of Excellence

Arrhythmia Coronary

Therapeutics Vascular Disease

Cath Lab

EP

CVOR2

Departments

•Traditional departments led by medical director/administrator dyad; manage day-to-day operations

•COEs focus on disease states, responsible for quality, business, research plans

•Reporting line to relevant COEs, but relationship between departments and COEs very collaborative in nature

Department and COE Functions

Lower mortality rates

Unified call schedule

Reduction in device spend

Inpatient nursing efficiencies

Business and Physician Leaders

Business and Physician Leaders

Benefits from Organization Design

Case in Brief: Piedmont Health

• Four-hospital system located in Atlanta, Georgia

• Within Piedmont Heart Institute, created seven disease-specific, patient-centric Centers of Excellence

• COEs responsible for quality, business, research plans

• COEs led by physician chief paired with business development administrator

• Physicians encouraged to participate in COE related to specialty, have option to participate in more

• Members include physicians, marketing, quality, nursing, finance representatives

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© 2011 The Advisory Board Company • www.advisory.com 26

Bridging gaps between surgical and medical specialists extends beyond the acute care setting. Collaboration with primary care specialists is critical to continuity of care. Novant Health in North Carolina includes community physicians in the cardiovascular service line’s strategic planning efforts. The multidisciplinary board must sign off on strategic priorities, including capital allocation. This board structure currently is being rolled out to women’s services, which will include OB-GYNs as well as anesthesiologists, surgeons, and primary care physicians.

Shared Strategic Responsibilities at Novant

Incorporating Community Physicians in Planning Efforts

Cardiovascular Institute Board

Nine Voting Members Set Service Line Strategy

• Cardiologists (3) • Cardiac surgeon • Radiologist • Service line leader • Primary care physician • Preventative cardiologist • At-large administrator

(currently held by hospital-based PCP)

Cardiovascular Institute Service Line Leader

Responsible for Integrating Cardiovascular Care

Hospital-based heart and vascular

services

Employed CV

specialists

CV nursing Ambulatory division (preventive

cardiology, HF clinic, aortic clinic,

arrhythmia clinic, cardiac rehab

Case in Brief: Novant Health

• 1900-bed system located in the Southeast

• Service line administrator oversees employed physician groups, inpatient nursing, preventive cardiology, cardiac rehab, and ambulatory services, with goal to oversee full continuum of care

• Institute board directs service line strategy; primary care, preventive cardiology representation ensures investment strategy takes holistic approach to cardiovascular needs of community

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© 2011 The Advisory Board Company • www.advisory.com 27

Source: Vanderbilt University Medical Center, Nashville, TN; Marketing and Planning Leadership Council interviews and analysis. 1 Profit and Loss statement.

Collaboration cannot be agnostic to financial incentives. Across the last decade, Vanderbilt University Medical Center in Tennessee has completely transformed its cardiovascular service line, operationally integrating cardiology and cardiac surgery with shared Profit and Loss (P&L) accountability. Recently, they integrated physician compensation plans to address income disparities across specialties and reward overall collaboration and success of the service line.

Cardiovascular Integration at Vanderbilt

Encouraging Collaboration through Shared Finances

Timeline of Financial Integration

c. 2000 2006 2009

Cardiology, cardiac surgery operationally integrated, no financial integration

Cardiology, cardiac surgery under one profit/loss statement

All CV departments under one profit/loss statement; institute launched

All physician compensation plans integrated

Benefits of Integrating P&L1

• Increased cooperation and accountability among physicians

• Augmented service line alignment with hospital strategic objectives

• Improved ability to recruit high-value specialists

• Increased referrals

Case in Brief: Vanderbilt University Medical Center

• 833-bed academic medical center in Nashville, Tennessee with 26-bed cardiovascular institute

• Integrated P&L and restructured incentive plan for physicians to be rewarded on the success of the overall program

• Impetus was twofold: address income disparities between academic physicians, those from acquired private practice; align center goals and incentives to run service more like a business

• Professional fee pooling applies to all of center’s 90 CV physicians; includes patient care activity, not research or academic activities; uses modified RVU system to allocate compensation

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© 2011 The Advisory Board Company • www.advisory.com 28

Source: Medicare Payment Advisory Commission, “Healthcare Spending and the Medicare Program,” available at: http://www.medpac.gov/documents/Jun10DataBookEntireReport.pdf, accessed February 9, 2011; Robert B and Jane H, “The Clinical Characteristics of Medicare Beneficiaries and Implications for Medicare Reform,” presented at: Conference on Medicare Coordinated Care, March 2002, Washington, DC; Marketing and Planning Leadership Council interviews and analysis.

1 Chronic Obstructive Pulmonary Disease.

IV. Building a Chronic Care Infrastructure

Share of Total Medicare Spend on Episodes

Medicare Enrollees by Chronic Condition

Beyond fostering relationships between specialists within a service line, collaboration will be essential to tackle the most immediate new priority: managing chronic disease. Since service lines focus almost exclusively on treating acute episodes, some diseases and patient populations are not served adequately through the traditional service line models. Therefore, creating a multidisciplinary model that facilitates collaboration between medical and surgical specialists both within and outside the hospital will be essential.

Chronic Conditions Largest Source of Health Care Spending

Service Lines Not Equipped to Manage Chronic Care

3.2%

3.4%

3.6%

4.0%

4.3%

Ischemic Heart Disease

Congestive Heart Failure

Hypertension

Cerebral Vascular Accident

COPD1

Diabetes

Serv

ice

Lin

es F

ocu

sed

on

A

cute

Pro

ced

ure

s Li

ttle

Ser

vice

Li

ne

Focu

s

14.0%

0 Chronic Conditions,

22.1%

1 Chronic Condition,

15.1% 2 Chronic Conditions,

16.3%

3 Chronic Conditions,

14.8%

4 Chronic Conditions,

11.3%

5+ Chronic Conditions,

20.3%

Page 29: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 29 Source: Marketing and Planning Leadership Council interviews and analysis.

1 Chronic heart failure. 2 Chronic obstructive pulmonary disease.

Because service lines today are ill-prepared to manage chronic disease, new payment incentives raise questions regarding future service line investment. As institutions assume more risk for managing patients with chronic disease, how much additional administrative overhead is necessary? Do health systems need a service line for every chronic disease and every at-risk patient population?

Historically, hospitals have organized service lines primarily based on physician specialty, but hospitals are considering newer service lines organized along demographic- and disease-based models.

Looking Beyond Specialty-Based Service Lines

Forcing Us to Rethink the Current Organization

Three Vectors of Service Line Organization

Disease-Based Service Lines

Demographic-Based Service Lines

Physician Discipline-Based Service Lines

Page 30: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 30

Source: United States Department of Veterans Affairs, available at: http://www.newengland.va.gov/servicelines/, accessed March 26, 2011; Charns MP, et al., “Service Line Management Evaluation Project,” Management Decision and Research Center, April 2001; Marketing and Planning Leadership Council interviews and analysis.

While reform threatens to shift incentives away from these service lines, hospitals need not eliminate service lines. For example, the Veterans Integrated Service Network assumes total cost accountability and fully embraces the concept of service lines. They do, however, prioritize service lines differently than most: Specialty and Acute Care form a single service line, along with Primary Care, Mental Health, and Geriatric Care. VISN uses the service lines to create a system that focuses on the holistic needs of their patient population. Ultimately, their goal of service lines is different than that of most organizations today: reduce variability of practice, in an effort to deliver better and more cost-effective care across the entire continuum.

Service Lines Still Integral in Value-Focused System, but Broader Reach

Total Cost Accountability Yields a Different Prioritization

Service Lines at the Veterans Integrated Service Network

Primary Care Service Line

Mental Health & Behavioral Science

Geriatrics and Extended Care

Spinal Cord Injury Disorders

Specialty & Acute Care

Facil itating Uniformity of Care

“Service lines have been very effective in reducing the variation of practice, leading to better and more cost-effective care. The primary care service line has been very effective in standardizing delivery and the way we do our work.”

Network Director Veterans Integrated Service Network (VISN)

Page 31: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 31 Source: Sharp HealthCare, San Diego, CA; Marketing and Planning Leadership Council interviews and analysis.

1 American Diabetes Association.

Some innovative institutions have invested in service lines that focus on cost reduction, rather than volume growth. By focusing administrative leaders on at-risk patient populations, they have seen measurable results.

For example, Sharp HealthCare in California elevated diabetes management to service line-status. As in other service lines, the diabetes leader manages a team and is held accountable to key performance metrics. Measurable results have been seen: for example, 100 percent compliance with diabetic order sets across the entire organization.

Sharp HealthCare’s Diabetes Service Line

Diabetes “Service Line” Coordinating Care

Diabetes Service Line Infrastructure

Average Inpatient Blood Glucose Levels

173

156

2003 2008

100%

0%

0% Cardiac surgery infection rate

Physician compliance with insulin order set

Post-op hip infection rate

Diabetes Service Line

Leader

Managing the Diabetes Team

• Three direct reports: APN2, Outpatient Diabetes Director and a “Super User” nurse

• Transplant service line incorporates pre-op insulin infusions in admission order sets

• Ortho/Neuro service line conducts classes to ensure normal A1c levels

• ICU screens all patients for elevated blood glucose levels upon admission

Collaborating Across Service Lines

• Percentage improvement in glycemic targets in ICU and acute care

• Reducing the number of patients with A1c levels >9

• Maintaining ADA1 recognition

Meeting Accountability Standards

• Five-hospital system located in San Diego, California

• System created diabetes service line to span inpatient setting, gaining executive and physician support to standardize inpatient diabetes care

• Service line director held accountable for improving glycemic targets in acute care and ICU, maintaining ADA1 recognition at outpatient clinics and reducing number of patients with A1c levels greater than nine

Case in Brief: Sharp HealthCare

Page 32: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 32 Source: Aurora Health Care, Milwaukee, WI; Marketing and Planning Leadership Council interviews and analysis.

1 Acute Care for Elders. 2 Senior Resource Nurse assists patients in rural sites with

psychosocial support needs such as housing. 3 National training methodology to improve quality of elderly care;

offered to nurses and interdisciplinary team (acute, clinic, long-term and home care) across four sites.

4 Community-based program implemented by nurse practitioner who evaluates referred seniors’ need for further clinical and community services.

Although old age is not a chronic disease, given the prevalence of chronic conditions in elderly populations, institutions are increasingly organizing geriatric service lines. Aurora Health Care in Wisconsin considers the geriatrics service line an “integrated service line”—working across other service lines to more effectively manage complex patients. Service line leaders have creatively kept administrative costs low, while still deploying innovative models across the system. They have rolled out an Acute Care for Elders (ACE) unit across all of their individual sites and have a novel eGeriatrician program, which allows rural sites to maintain ACE units without in-house geriatricians.

Aurora Health Care’s Geriatric Service Line

Geriatrics Designed as “Integrated” Service Line

“Seniors Service Line” Infrastructure

Service Line Leadership

Team

Medical Director

Admin Leader

Nurse Leader

Geriatrics Service Line Initiatives

ACE¹ Programs and ACE Tracker tool help identify patient risks for functional decline and poor outcomes

Geriatric Inpatient Consult Service as

requested by provider or patient family

eGeriatrician teleconferencing at six rural

sites twice a week

SRN², NICHE³, and Bridge⁴

3,000

150

830 Seniors avoiding functional decline

Urinary catheters avoided per year (2006 vs. 2010 data)

Urinary tract infections avoided

Case in Brief: Aurora Health Care

• 14-system hospital system located in Milwaukee, Wisconsin

• Established first ACE unit in 2000; by 2010, developed virtual ACE programs at every hospital

• Uses ACE Tracker, a computer generated checklist, to identify patients with higher risk for functional decline and poor outcomes

• Piloted a number of Senior service line programs at select hospitals including Geriatric Inpatient Consult Service, E-Geriatrician and NICHE

• Senior service line budget kept low by collaborating with hospitals to budget geriatrician salaries as local sites’ expense

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© 2011 The Advisory Board Company • www.advisory.com 33

Source: Henry Ford Macomb Hospitals, Macomb County, MI; Marketing and Planning Leadership Council interviews and analysis.

While fee-for-service incentives do not compel hospitals to prioritize chronic care, value-based purchasing and readmissions penalties—both potential threats to overall financial performance –are inflating the strategic value of the medical enterprise for all organizations. For this reason, Henry Ford Macomb Hospitals in Michigan recently created a General Medicine Service Line. The ultimate vision is to build relationships with primary care to better manage chronic disease in and out of the hospital. However, their initial focus includes providing oversight for inpatient initiatives, coordinating efforts to strategically consolidate all of their efforts on readmissions. Building an infrastructure to more effectively manage chronic disease is the end goal, but a goal that requires time to achieve.

Henry Ford Macomb’s General Medicine Service Line

Centralizing Medicine Under One New Service Line

General Medicine Service Line Development

A Three-Phase Approach for Newly-Created Service Line Leader

Phase I: Develop Relationships

Phase II: Track Outcomes

Phase III: Manage Chronic Disease

Defined two groups of target

physicians: PCP Attendings (hospitalists and internal medicine) and General Medicine Specialists1

Tracking quality metrics,

inpatient volume, general medicine market share, outpatient volume and PCP referrals (splitter analysis)

Spread partnerships

(external PCPs, nursing homes, etc) and create a plan to manage chronic disease across the entire continuum of care

Case in Brief: Henry Ford Macomb Hospitals

• 638-bed hospital system located in Macomb County, Michigan; part of six-hospital Henry Ford Health System

• Focusing initial service line initiatives with internal medical specialists (hospitalists and general medicine specialists) and PCPs who round internally, in the hope of building relationships that will ultimately bridge to a coordinated chronic care management strategy

Page 34: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 34 Source: Marketing and Planning Leadership Council interviews and analysis.

No matter how aggressively an organization pursues shared savings, initial mandatory reforms will require better chronic care management, as will the financial risk associated with a growing Medicare population. As a result, apportioning chronic care management responsibilities to service line leaders can be a viable strategy for many providers, ensuring sufficient administrative and strategic oversight for these emerging risks.

However, institutions must guard against overinvestment in light of scarce capital dollars, thinning margins and a shifting payer mix. Three strategies are emerging to address oversight of chronic care, with varying degrees of investment required. First, assign chronic care to existing service line leaders. Second, create a dedicated “chronic care” service line. Finally, depending on the local prevalence of at-risk patient populations and institutional aggressiveness toward new payment models, some may consider selective investments in specific disease-based or population-based service lines.

Strategic Allocation of Chronic Care Purview Minimizes Incremental Overhead

Filling Gaps Without Ballooning Overhead the Challenge

Three Approaches to Apportion Chronic Care

Approach #1: Assign Chronic Care to

Existing Leaders

Approach #3: Create New Disease-Based

and Population-Based Service Lines

Cardiovascular • Heart Failure • Diabetes • Pulmonary

Ortho • Geriatrics

Cardiovascular Ortho

Geriatrics Diabetes Ambulatory

• Primary Care

Approach #2: Create Dedicated “Chronic

Care” Service Line

Chronic Care • Heart Failure • Diabetes • Pulmonary • Geriatrics • Primary Care

Degree of Additional Administrative Overhead Required

Page 35: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 35 Source: Marketing and Planning Leadership Council interviews and analysis.

No matter the approach an organization pursues for chronic care, working across service lines will be increasingly important as many patients exhibit multiple co-morbid conditions. A common criticism of service lines is that while they were created to break down silos between specialists, they have created new silos between service lines and sites of care. While many service line leaders need to coordinate across various departments today, managing chronic disease will require a more intensive effort to manage patients across time, specialties and various sites of care.

Ultimately, no one individual or service line leader will likely be able to oversee the entire care continuum. The key to a successful service line infrastructure will not be whether the individual components are effectively managed, but whether leaders can work together in a matrix environment.

Collaborative Infrastructure Facilitates Management of Chronic Disease

Collaboration Across Service Lines Essential

Methods to Encourage Collaboration Across Service Lines

Method Description Example

Service Line Administrative Meeting

Meeting for service line administrators and VP of Marketing/Planning; goal is to share information about service line initiatives and optimize performance across service lines

Meeting results in standardization of diabetes care across service lines

Multidisciplinary Service Line Committee

Each service line has an Executive Committee, chaired by the physician scientist leader, and attended by other service lines; focus is on addressing quality and efficiency challenges

Women’s heart program developed after women’s services director sits on CV board

VP of Service Lines

Position created to increase collaboration between service lines; focus is on strategy and identification of opportunities for collaboration between service lines

Ortho/Neuro and Oncology directors collaborate on new clinical pathways for sarcoma patients

Res

ou

rce

Inte

nsi

ven

ess

Mo

st

Leas

t

Page 36: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 36 1 Bold indicates service line-based priorities.

V. Elevating Service Lines to System Level

While hospitals have consolidated into health systems across the country for some time, few organizations have leveraged their scale to fully integrate clinical services. Providers must carefully consider the benefits and challenges of system-level service line organization. Some health systems prefer that local facilities maintain autonomy. The onset of value-based competition, however, forces health system leaders to analyze the degree of integration necessary to prove system value. Many system executives are pursuing greater integration to generate efficiencies through coordinated operations, reduce variation through shared clinical standards, and better manage care across the continuum. These business strategies reflect the need for systems to demonstrate value to patients, rather than using system status solely for leverage with payers and suppliers.

Leveraging the Benefits of Service Line Management at the System Level

System-Level Service Lines Not for the Faint of Heart

Stages of System-Level Integration¹

Degree of Business Unit Integration

Imp

act

on

Co

st, Q

ua

lity

an

d A

cces

s

Assembling Scale for Leverage

Generating Efficiency Through Coordinated

Operations

Reducing Variation Through Shared Clinical

Standards

Managing Care Across the Continuum

Supporting Mission Sites and Services

Providing Access to Capital

Embracing Shared Operating Standards

Spreading Expertise Across BUs

Rationalizing Care Sites and Delivery

Shared Clinical Information Systems

Common Clinical Pathways

Trading Patients Across Sites

Managing Care Transitions

Continuing Disease Management

Continuing Wellness Intervention

Page 37: Marketing and Planning Leadership Council · Source: Marketing and Planning Leadership Council interviews and analysis. 1 Pseudonym. However, the service line model as it exists today

© 2011 The Advisory Board Company • www.advisory.com 37 Source: Marketing and Planning Leadership Council interviews and analysis.

1 Pseudonym.

A primary goal of system-level service line integration is to leverage the scale and innovation of the organization to improve efficiency and quality. Many organizations pursuing system-level service line management are prioritizing two key initiatives: first, beginning to standardize care pathways through shared protocols, and second, directing investment in certain service lines toward specific hospitals, prioritizing “centers of excellence.” These initiatives allow systems to accelerate best practice sharing, rationalize care sites and reduce unnecessary duplication of high-end services.

One hospital (with the pseudonym of Maddux Health) is actively pursuing a new horizontal management structure designed to (1) identify opportunities for standardization across sites, (2) integrate clinical practice decisions and (3) eliminate unnecessary variation across sites.

System-Level Matrix Structure Enables Standardization, Care Improvement

Horizontal Infrastructure Cuts Across Hospital Sites

Maddux’s Management Structure

Corporate Medical

Clinical Operations

Support Services

Administrative Services

Hospital C Hospital B Hospital A Cardiovascular

Oncology

Orthopedics

Diabetes

Neuroscience

OB

Eradicating Unnecessary Variation

“In order to identify and eliminate variance, however, we’ve now added a horizontal management structure to the [vertical] structure we already had in place. This means that each function will now also be part of a horizontal team, managed system wide by new ‘horizontal leaders,’ [Corporate VPs] in collaboration with facility chief executives and other site leaders. “

Maddux Health

Service Lines

Case in Brief: Maddux 1 Health

• Four-hospital health system located in Southeast

• Objectives for reorganizing included reducing costs to fit new reimbursement structures, eliminating variation and integrating clinical practice decisions

• Operating teams meet monthly to identify opportunities for standardization

• Horizontal management facilitates integration across inpatient and ambulatory services

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© 2011 The Advisory Board Company • www.advisory.com 38

Source: Centura Health, Englewood, CO; Marketing and Planning Leadership Council interviews and analysis.

1 Councils set strategy for system-level service lines as well as other strategic improvement initiatives such as Health Management and Nursing.

There are two key considerations when implementing a system-level service line organization: the degree of centralization at the system level, and the reporting relationship of system-level service line leaders. Central to this challenge is the need to balance system-level initiatives with the autonomy of individual hospital CEOs and their strategic priorities.

In an effort to strike the right balance between the two, Centura Health completed a rigorous process to prioritize service lines worthy of system-level centralization. The system identified 10 potential service lines meriting system status through a comprehensive survey. Thirty-five working groups then voted and chose the top three based on the service lines’ impact on the system: trauma, stroke and cardiovascular services.

Deliberately Select Service Lines for Elevation to System Level

Evaluate Need for System-Level Service Lines

Centura’s System-Level Service Line Prioritization Process

Initial Survey

Qualitative Evaluation

Selection Consideration of Additional Choices

8-10 potential system-level service lines identified through initial survey

35 working groups evaluate options based on impact to system, need to improve quality

Working groups vote on top three system-level service lines; based on voting, Trauma, Stroke and CV selected for systemization

After time, considered additional service lines for systemization

Council Formation

35 working groups reduced to 7 system-level Councils1 tasked with strategizing on system-level priorities

Case in Brief: Centura Health

• 13-hospital system with seven senior living communities, home care and hospice services; headquartered in Englewood, Colorado

• 350 people, working in 35 groups across the system evaluated the top 8-10 options for systematized service lines; voted on top three

• Consideration factors for selecting systematized service lines included qualitative criteria such as potential impact on the system, need to improve quality and existing structures and relationships

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© 2011 The Advisory Board Company • www.advisory.com 39

Source: Centura Health, Englewood, CO; Marketing and Planning Leadership Council interviews and analysis.

Each priority service line receives a dedicated system-level administrator and a system-level council. Clinical and administrative leaders from across the system are represented equally on the council. The council sets the system-level strategic priorities for the service line and defines key indicators for tracking progress on those goals.

Local hospitals and regional groups then determine their plans for contributing to system-level strategic goals, reporting back their most innovative practices to the council. Centura leaders believe they have struck the right balance, setting system-level goals while still allowing for local autonomy and innovation.

Individual Sites Should Retain Entrepreneurial Freedom

Set System-Level Goals But Allow Local Flexibility

Centura’s System Level Leadership

Hospitals and regional groups determine operational modality to meet system-level goals

System-Level Councils

• 15-20 person groups

• 50% clinical, 50% business backgrounds

• Meet bi-monthly to set strategy for system-level service lines

• Agenda guided by Executive Sponsor

Council sets system-level strategic goal and metrics to track success

1

2

3

Hospitals and regional groups report back to Council on innovative ideas for reaching system goals

Speaking with the Same Voice

“We coined the term ‘Centuratization’ because we wanted to speak with the same voice but still allow disciplined entrepreneurship and autonomy at the local level. In the past, we had gone back and forth between centralization and decentralization and wanted to avoid choosing one versus the other. ‘Centuratization’ allows us to set system-level goals together with local entities, and then allows the entities to implement them in a way that makes sense regionally.”

Pam Nicholson, Senior Vice President Centura Health

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© 2011 The Advisory Board Company • www.advisory.com 40 Source: Marketing and Planning Leadership Council interviews and analysis.

Ultimately, the degree of collaboration across sites depends on the leadership infrastructure. System-level matrices are especially complicated as system-level service line leaders must also maintain effective relationships with individual hospital executives. If the system service line executive and the hospital CEO report to the same individual, they are more likely to collaborate.

Other service line reporting structures are available beyond the centralized model. Typically, the more decentralized the reporting, the lower the level of overall “systemness” and integration, with service line leaders typically serving in a “special projects” capacity.

Service Line Reporting Structures at Four Health Systems

Degree of Systemization Hinges on Leadership

Centralized Reporting

Regionalized Reporting

Local and Corporate Reporting

Separate Hospital-Based Reporting

• Benefits: Localized reporting facilitates collaboration across sites; easier to get buy-in on initiatives

• Drawbacks: No sharing of best practices, standards across entire system

• Benefits: Reporting relationships facilitate rationalization of services and collaboration between service lines and local sites

• Drawbacks: Multiple responsibilities for one executive leader

• Benefits: Dual reporting relationship strengthens service line leader accountability across all levels

• Drawbacks: Service line leader reports to everyone and no one

• Benefits: Executive-level thinking guiding service line priorities

• Drawbacks: Lack of coordination between service lines

Hospital CEO

Service Line Leader

System COO

Hospital CEO

Service Line Leader

System CEO

Hospital CEO

CV Leader

Hospital CEO

System COO

Hospital A

Ortho Leader

Hospital B

Hospital A CV Leader

Region B

Region A

Hospital B CV Leader

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© 2011 The Advisory Board Company • www.advisory.com 41

Re-Designing Care Processes for Value

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© 2011 The Advisory Board Company • www.advisory.com 42 Source: Marketing and Planning Leadership Council interviews and analysis.

With the right service line infrastructure in place, institutions position themselves to begin the process of re-designing the specialty care they provide. The imperative to re-design care will only grow in importance as margins drop and the percentage of at-risk payments increases. Ultimately, the goal will be to provide the right care, in the right place, at the right time. Planners play a role in navigating this complicated transition, supporting service lines as they pivot toward elevating the value of care.

This section, building on the previous section, focuses on leveraging service lines to build an efficient, evidence-based specialty care enterprise within the hospital, as well as extending the service line’s purview beyond the hospital in response to assumption of greater risk.

Key Imperatives for Implementing Value-Based Care

Re-Designing Care Processes for Value

6 Beginning the Process of Care Standardization • Strategically prioritize standardization efforts • Encourage a collaborative, physician-led process

8 Directing Patients to “Right” Site of Care • Triage demand to lowest-acuity setting necessary to maximize efficiency • Develop pathways that appropriately prioritize conservative treatment options

7 Creating a Patient-Centered Focus with Multidisciplinary Care • Hardwire collaboration in care planning and delivery to ensure patient-centered focus • Employ tumor board-style approach for complex patients beyond oncology

9 Formalizing Relationships with Post-Acute Care • Assign service line leaders role in coordination with post-acute care facilities • Create mechanisms for on-going communication and consistent patient follow-up

Exercising Caution with Service Line-Specific Prevention Efforts • Leverage ambulatory specialty clinics to move upstream, reduce hospital-based care • Consolidate investments in wellness programs to maximize use of resources

10

Waiting for National Registries Before Pursuing Long-Term Outcomes Tracking • Participate in national registries to minimize costs of long-term outcomes tracking • Track survey-based outcomes for elective procedures

11

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© 2011 The Advisory Board Company • www.advisory.com 43

Source: HealthLeaders Media, “2010 HealthLeaders Media Industry Quality Leaders Survey,” available at: www.healthleadersmedia.com, accessed September 20, 2010; Marketing and Planning Leadership Council interviews and analysis.

1 Survey asked, “In your opinion, how effective are the following measures in improving physicians’ quality of care: better treatment guidelines or protocols?”

Evidence-based medicine is central to care re-design initiatives. Clinicians have discussed the concept of evidence-based medicine for decades but haven’t fully capitalized on its potential benefits. Optional in the past, the evidence-based approach to medicine will become a necessity as providers focus more keenly on value. As new payment models hold providers increasingly accountable for patient health and outcomes, providers will need to leverage evidence-based medicine to maximize the likelihood that the care they provide is the optimal option for the patient. Such an approach will simultaneously reduce variation in cost and eliminate inappropriate utilization.

Potential Benefits of Evidence-Based Medicine

Evidence-Based Medicine the Key to “Value” Creation

Improving Outcomes

34%

44%

18%

4%

• Improved outcomes, lower complication rates reduce length of stay and total costs

• Elimination of unwarranted variations in care improves efficiency

• Delivery of evidence-based care ensures patients receive only the most appropriate treatments, reducing unnecessary utilization

Slight

Moderate

None Strong

HealthLeaders 2010 Quality Leaders Survey1

Effectiveness of Treatment Guidelines in Improving Quality

Reducing Costs

Right-Sizing Utilization

1 2

3

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© 2011 The Advisory Board Company • www.advisory.com 44 Source: Marketing and Planning Leadership Council research and analysis.

1 Size of bubble represents degree of effort required.

Care re-design carries a caveat: initially, payment systems will provide only limited rewards for value. While incentives will eventually shift to more fully reward value, implementation of some imperatives included in this section may negatively impact profitability in a fee-for-service environment. Thus, institutions should strategically deploy these initiatives. Care re-design should prioritize efforts that enhance profitability under fee-for-service, laying the groundwork for future improvements that yield rewards under risk-based payment models.

Center Near-Term Efforts on Margin-Enhancing Tactics

Some Initiatives Will Erode Fee-for-Service Profitability

Sample Initiatives by Profitability and Enduring Benefit¹

The Emerging Frontier

Reduce duplicative testing

Optimize procedure selection

Reduce utilization of high-cost, low-value procedures Reduce

Never Events

Contain supply costs

Reduce inappropriate admissions

Prevent readmissions

Tomorrow’s Challenges

Promote primary prevention, wellness

A Continued Priority

Improve physician documentation

Track, analyze short-term outcomes

Develop evidence-based treatment pathways

Margin Erosion Margin Enhancement

Aims of Reform

Impact on Profitability Under Fee-For-Service

Track, analyze long-term outcomes

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© 2011 The Advisory Board Company • www.advisory.com 45 Source: Marketing and Planning Leadership Council interviews and analysis.

VI. Beginning the Process of Care Standardization

Standardizing high-quality care starts with identifying best-in-class protocols and hardwiring them via care pathways across sites of care. The enormity of the task requires that hospitals begin by identifying areas where care variation results in poor patient outcomes and increased clinical and financial risk. While each organization’s priorities and level of physician engagement will dictate where to start, hospitals generally categorize the opportunities across three overlapping vectors: type of payment reform, care protocols, and clinical disease or procedure.

The more aggressively hospitals pursue risk-based payment, the more they’ll need to prioritize standardization efforts most relevant to the new incentives they face. After accounting for reform, hospitals should next target high-volume and/or high-variability clinical areas before examining which protocols to standardize.

Prioritizing Standardization Across Competing Processes

Commonsense Rules for Which Standards to Fast-Track

Potential Care Process Standardization Efforts, by Dimension

Order Set

Discharge Plan

Length of Stay

Consults Cost Target

Device Usage

Care Setting

Imaging Utilization

Shared Savings

Bundled Payments

RAC Audits

Readmissions Penalties

HF Hip

PCI Spine

Protocol Type

Clinical Area

Reform Incentive

By Clinical Area

Highest volume Highest revenue Lowest contribution profit Biggest readmission risk Most evidence-based medicine

By Reform Incentives

Near-term reforms Strategic priorities Areas that contribute positively

to bottom line in fee-for-service

By Protocol Type

High degree of consensus Low complexity Most variable Ability to standardize Sufficient patient volumes

Care Process Standardization Targeting “Rules of Thumb”

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© 2011 The Advisory Board Company • www.advisory.com 46 Source: Centra Health, Lynchburg, VA; Marketing and Planning Leadership Council interviews and analysis.

By Reform Incentive

Payment reform provides hospitals with an opportune moment to engage all stakeholders in care standardization. For example, Centra Health, in an effort to lower preventable readmission rates, formed a “drill down” committee comprised of stakeholders including cardiologists, hospitalists, nurses and ED specialists. The team analyzed a range of cases to identify variations in care across physicians or care teams that reduce the consistency of outcomes.

By zeroing in on variation and determining the steps necessary to achieve the best patient outcomes, Centra was able to develop standards to improve processes and set a baseline for monitoring future performance.

“Drill Down” Readmissions Committee at Centra

Zero In On Immediate Concerns: RACs, Readmissions

Committee Composition

Case in Brief: Centra Health • Three-hospital system located in Lynchburg, Virginia

• Focused on standardization of cardiovascular (CV) readmissions to address rising health care costs, prepare for health care reform

• Identified impacts, root- causes of CV readmissions • Developed subcommittee to set standards for CV readmissions

Committee made up of cardiologists, hospitalists, nursing, quality, finance, ED representatives

• Readmissions within 30 days of discharge

• Cases at high risk for any admission (admitted to hospital twice during last year)

• Cases at high risk for readmission (admitted to hospital three or more times during last year)

Developed a robust data set and committee accountable for monitoring readmission rates

Targets of Analysis

Committee Outputs

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© 2011 The Advisory Board Company • www.advisory.com 47 Source: ThedaCare, Appleton, WI; Marketing and Planning Leadership Council interviews and analysis.

1 Evidence-based medicine.

By Clinical Area

Prioritizing standardization by clinical disease or procedure forces institutions to look across the care continuum in a value stream mapping process. ThedaCare employed value stream mapping as part of its implementation of LEAN principles, bringing together various stakeholders to map an entire disease pathway. By engaging all the key constituencies in prioritizing standardization efforts, ThedaCare believes they have built a culture that is centered around reducing variation in practice.

ThedaCare’s 18-Month Orthopedic Value Stream Process

“Value Stream Mapping” Across the Care Pathway

Steps to Value Stream Mapping

Form Multi-Disciplinary Taskforce

Analyze Internal Data

and EBM1

Prioritize Care Pathways for Development

• Total volumes

• Variability of pathway

• Profitability

• Growth potential

• Internal assessment of care delivery process, outcomes, cost

• External review of EBM

• Engage all providers across pathway from diagnosis to “cure”

• Schedule 1-3 day summit to review data

• Identify flashpoints across pathway

• Prioritize targets for standardizing

• Set timeline and metrics of success

• Engage stakeholders in change effort

• Monitor adherence to action plans

• Revisit standards as evidence, experience develops

Implement Plan and Track

Adherence

Develop Plan for Standardization

• Four-hospital, community based health system located in Appleton, Wisconsin

• Utilized the LEAN process to develop an enterprise-wide value stream

• Underwent value stream mapping process for top disease states at institution in an effort to standardize care

• Identified several “rapid improvement events” within each value stream map, then targeted for improvement by multifunctional teams

Case in Brief: ThedaCare

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© 2011 The Advisory Board Company • www.advisory.com 48 Source: Baylor Health Care System, Dallas, TX; Ballard DJ, et al., International Journal for Quality in Health Care, October 2010: 1-8; Marketing and Planning Leadership Council interviews and analysis.

By Protocol Type

Organizations may find value in standardizing similar protocols for all disease or procedures across the enterprise. For example, Baylor Health Care System in North Texas developed an effective process for prioritizing order set standardization. Key to their process, a multidisciplinary team uses objective criteria to evaluate research. Baylor’s team groups the criteria in three categories. The first category is the validity of available research. Next is the opportunity assessment, which prioritizes those order sets with the highest volume of patients potentially affected by the guidelines. The final category consists of operational considerations, including the ability of the organization to achieve consensus on the standard.

Cardiovascular Order Set Initiative at Baylor

Starting with Order Sets

Order Set Design Team

• Representatives from each hospital in system

• Physician champions

• Disease-specific specialists

• Pharmacy liaison

• Nursing liaison

Evaluation of Need for Standardized Order Sets

Validity of Practice

• Robust clinical evidence to support guideline

• Guideline associated with significant improvement in patient outcomes

Opportunity Assessment

• Sufficient patient volume

• Significant potential to improve care, based on input from service line leaders

• Need demonstrated by institution performance on relevant Joint Commission Core Measures

• Aligned with internal performance improvement goals

Operational Considerations

• Ability to standardize processes

• Ease of patient identification

• Availability of necessary resources, technology in each department to implement practice

• Adequate time since internal guidelines last revised

Case in Brief: Baylor Health Care System

• 26-hospital health care system headquartered in Dallas, Texas • Multidisciplinary Design Team meets semiannually to review new guidelines, incorporating

necessary changes into system-wide order sets • Criteria used to assess areas of greatest potential for improvement through standardization • Greatest return on investment realized by prioritizing evidence-based practice that aligns

with institutional goals, limits unnecessary resource utilization • Implemented over 50 protocols since 2006

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© 2011 The Advisory Board Company • www.advisory.com 49

Source: AHRQ, “Creation and Coordination of Operational and Evaluation Structure,” available at: http://www.ahrq.gov/qual/rapidcycle/rapidcycle2.htm, accessed March 20, 2011; Marketing and Planning Leadership Council interviews and analysis.

The process of standardization looks similar regardless of how hospitals prioritize efforts: hospitals create a physician-led committee, gather internal and external data, set clear standardization goals and metrics, and continue to refine the standards over time. Clinical practice standards are only as good as the underlying evidence behind them, the continuous testing they undergo, and the flexibility allowed for principled variation based on patient need.

Thedacare, as an example, held a three-day value stream summit with 40 participants including physicians from varied disciplines and representatives from various sites of care like rehab and skilled nursing. On the first day, participants examined the current state of the pathway, and the next day they compared the present state to the ideal state. Finally, the committee prioritized efforts and established a plan with clear owners and timeframes.

Critical Elements for Developing Standards

In Any Case, Collaboration Essential

Data Gathered

• Procedure volumes

• Cost variability

• Outcomes variability

• Reimbursement

• Profitability

• Patient flow data

• Growth potential

• Referral patterns

• Pertinent data from EMR, EBM

Advisory Committee Members

• Service line administration

• Surgery

• Finance

• Materials management

• Nursing

• Radiology

• Anesthesiology

• Quality

• Supply chain management

• Skilled nursing facility

• Rehabilitation

• PCP

• Non-operating physicians

To Do

• Analyze current state • Identify processes of focus • Find process inefficiencies

• Determine ideal state • Explore options for process

optimization • Alter process for optimal

efficiency • Finalize new standards

• Prioritize standards for implementation

• Set standardization timelines • Determine evaluation metrics

Standardization Priorities

1. Implant costs 2. Order sets 3. Total hip

replacement length of stay

4. OR turnover time 5. Imaging utilization 6. Discharge protocols

Meeting Preparation Meeting Agenda Meeting Output

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© 2011 The Advisory Board Company • www.advisory.com 50 Source: Surgery Compass; Marketing and Planning Leadership Council interviews and analysis.

1 Pseudonym. 2 Percentiles reflect intra-institution comparison. 3 n=68. 4 n=66. 5 n=58. 6 n=92. 7 n=91. 8 n=83.

Effective standardization requires accurate and relevant data. To bring quantitative rigor to standardization, hospitals should analyze both internal and external variability, across clinical protocols, process measures, and finances. Hospitals must not rely solely on quantitative data, however. Interviews with key stakeholders, including physicians, nurses, and—potentially—patients, can be especially helpful to identify potential causes of variations shown in the data.

Comparison of Data to Internal and External Benchmarks

Using Performance Data to Drive Standards

Sample Internal Data Comparison

Data Gathered from Brett Hospital Orthopedic Service Line Dashboard¹

Procedure

Supply Cost Per Case Length of Stay

Volume Percentile²

Volume Percentile²

25th 50th 75th 25th 50th 75th

Total Knee 1,278 $5,367 $5,021 $4,354 1,265 4 3.7 3

Total Hip 473 $4,745 $5,529 $6,555 468 4 3.5 3

Spinal Fusion

365 $6,319 $5,287 $3,890 362 1.8 1.5 1

Averages Gathered from National Benchmarks

Procedure

Supply Cost Per Case Length of Stay

Volume Percentile

Volume Percentile

25th 50th 75th 25th 50th 75th

Total Knee 20,423³ $6,810 $5,352 $4,572 26,728⁶ 4 3 3

Total Hip 11,623⁴ $7,262 $6,045 $5,091 15,386⁷ 4 3 3

Spinal Fusion

5,923⁵ $6,681 $4,495 $3,667 6,737⁸ 2 1 1

Data Compared to National Benchmarks

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© 2011 The Advisory Board Company • www.advisory.com 51 Source: Intermountain Healthcare, Salt Lake City, UT; Marketing and Planning Leadership Council interviews and analysis.

Most physicians and administrators agree that providers must retain the freedom to adopt or modify standards as specific cases dictate. But hospitals can use such exceptions to inform care pathway refinement rather than allow it to undermine the credibility of individual standards or broader standardization efforts.

At Intermountain Healthcare, physicians always have the option of overriding existing standards embedded in the EMR. Teams then proactively review overrides to determine whether the organization should modify standards to better meet the needs of patients and practitioners. The standards therefore continually undergo minor adjustments to better support physicians and optimize care pathway options for patients. Major adjustments continue to be made on a biannual basis.

Example of Feedback Loop in Guideline Development Process

Refine Guidelines with Physician Feedback

Send draft to cardiology medical directors, request

feedback

2 1

Discuss concerns with individual physicians, ask for evidence to support

suggested changes

3

CV directors, content experts draft internal guidelines based on

latest evidence

5 4

Incorporate evidence-based feedback into

guidelines

6

Iterative process repeated as new evidence published

Discuss concerns one-on-one, obtain evidence to support suggested changes

Present guidelines at department meetings to raise awareness, solicit

additional feedback

Send final draft to all cardiologists, other

stakeholders affected by guidelines

Case in Brief: Intermountain Healthcare

• 23-hospital system located in Salt Lake City, Utah • Collaborative, iterative guideline creation process involves all physicians affected by new orders • Method ensures guideline accurately incorporates evidence and is acceptable to physicians • Process of designing a new guideline takes about three months • Proactively engaging physicians has resulted in increased adherence to guidelines

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© 2011 The Advisory Board Company • www.advisory.com 52

Source: Lewis WR, et al., “An Organized Approach to Improvement in Guideline Adherence for Acute Myocardial Infarction,” Archives of Internal Medicine, 2008, 168: 1813-1819; Marketing and Planning Leadership Council interviews and analysis.

1 Get With the Guidelines – Coronary Artery Disease.

Hospitals should track compliance with standards to improve adherence and ensure realization of cost and quality gains through improved care pathways. Institutions that track guideline compliance see increased adherence to protocols. Individuals who know data is being collected are more likely to conform to the desired behavior. In one national initiative to track adherence to evidence-based protocols, hospitals reported marked improvements in performance simply through program involvement.

Study Suggests Impact of Measuring Compliance

Ongoing Tracking Improves Adherence to Guidelines

Comparison of Composite Performance Scores Between Quality Improvement

Program Participants and Non-Participants

p<0.001

Study in Brief: An Organized Approach to Improvement in Guideline Adherence for Acute Myocardial Infarction

• Compared compliance with process measures of GWTG-CAD¹ participants (223) with non-GWTG-CAD participants (3,407) using Hospital Compare data

• GWTG is a national, hospital-based quality improvement program sponsored, developed by the American Heart Association

• Calculated two composite scores for each hospital: eight-measure composite score including all Hospital Compare AMI measures, four-measure composite score including the four “performance measures” used to guide performance achievement award selection in the GWTG-CAD program

• Adherence to the overall Hospital Compare composite measure was higher in GWTG-CAD hospitals than in non–GWTG-CAD hospitals

89.7% 89.5%

85.0% 83.0%

Hospital Compare 8-Measure Composite

GWTG 4-Measure Composite

GWTG-CAD Participant

Non-GWTG-CAD Participant

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© 2011 The Advisory Board Company • www.advisory.com 53

Source: Al-Khatib S, et al., "Non-Evidence-Based ICD Implantations in the United States," Journal of the American Medical Association, 2011, 305: 43-49; Marketing and Planning Leadership Council interviews and analysis.

1 Implantable cardioverter defibrillaror. 2 Pseudonym. 3 As determined by practice guidelines for ICD therapy.

Clinical guidelines evolve over time. Thus, hospitals must recognize and plan for the need to constantly update standards as new clinical data emerge. Recent scrutiny of defibrillator implants provides a good example: a study found that a quarter of all defibrillator implants (ICDs) do not follow guidelines. The Department of Justice has begun aggressively investigating institutions for Medicare fraud. In response, Gwynn Hospital created a checklist to ensure that their implantation of ICDs adheres to CMS payment rules. Physicians, though, are allowed to deviate from the checklist when they feel clinical care is being compromised. But they must request a second opinion from another electrophysiologist before varying from the protocol.

Protocol Development Includes Option to Go Outside Guidelines

Recognize that Even Guidelines Have Flaws

Gwynn Hospital implements a checklist to ensure ICD implantations meet CMS criteria for reimbursement³

Vast majority of ICD implants meet CMS criteria for reimbursement

If second physician recommends ICD therapy, implant performed but bill to CMS held to avoid scrutiny

If patient does not meet checklist requirements, documented second opinion sought

22.5%

Patients Receiving Non-Evidence-Based ICDs

Timing of implant key issue for non-evidence-based ICDs¹

Standardize Process

Implement Standardization

Plan for Outliers

Anticipate Scrutiny

Case in Brief: Gwynn Hospital 2

• Multi-hospital, not-for-profit health care system headquartered in the South

• In response to concerns for ICD time to implant criteria outlined in AHA, HRS guidelines, CMS reimbursement, Gwynn implemented a checklist in early 2011 to account for coverage criteria

• Every case reviewed against checklist prior to scheduling

• If checklist requirements not met, documented second opinion is sought

• If physicians decide to proceed despite case not meeting checklist requirements, bill is held

• Process ensures documented, tracked standardized decision making

Process for Non-Guideline Care

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© 2011 The Advisory Board Company • www.advisory.com 54 Source: Marketing and Planning Leadership Council interviews and analysis.

Across organizations that have successfully leveraged standardization efforts to improve patient outcomes and reduce the cost of care, six key characteristics emerge. Many of these elements center on the cultural components of creating and implementing standards – leaders are involved, physicians are engaged, and IT resources and incentives encourage engagement in the process. In addition, sufficient flexibility allows for continual evolution towards optimal care.

Keys to Establishing a Culture that Values Standardization

Building Blocks for Successful Standardization

Numerous opportunities for standardization, start with most immediate reforms, most consensus

Strategically Prioritize Standardization Efforts

Physician-led standardization is critical to initial and ongoing success

Encourage a Collaborative Physician-Led Process

Identify internal variability to identify opportunities, also use external benchmarks and evidence-based guidelines

Assess Variability Both Internally and Externally

Embed IT in all stages of standardization to keep everyone accountable

Embed Accountability through Adherence Tracking

Create a learning system that can self-correct to address unwarranted deviation

Self-Correct for Unwarranted Deviation

Allow for principled variation to make what is in the patient’s best interests paramount

Allow for Principled Variation

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© 2011 The Advisory Board Company • www.advisory.com 55

Source: Berwick D, “Launching Accountable Care Organizations — The Proposed Rule for the Medicare Shared Savings Program,” New England Journal of Medicine, available at: http://healthpolicyandreform.nejm.org/?p=14106& query=home, accessed April 3, 2011; Marketing and Planning Leadership Council interviews and analysis.

VII. Creating a Patient-Centered Focus with Multidisciplinary Care

In addition to standardizing care, hospitals must also build a culture that encourages multidisciplinary collaboration, thereby hardwiring patient-centeredness. Organizing service lines by provider specialty may be an effective administrative approach, but service lines should create mechanisms that facilitate collaboration across specialties. Multidisciplinary care plays a critical role in ensuring holistic, effective care, as well as in engendering patient engagement. Developing patient-centered care requires elements like patient education, psychosocial support, and shared decision. However, hospitals need capabilities like navigation, multidisciplinary care, and survivorship to enable patients to reap the full benefits of these services.

A Comprehensive View of Patient-Centered Care

Furthering Shift Toward Patient Centeredness

Multidisciplinary Care

Services

Survivorship Navigation

Psychosocial Support

Patient Education & Empowerment

Care Coordination

Shared Decision Making

Patient-

Clinician Communication

Planning for End of Life

Connection

to Community Resources

Support for Family & Caregivers

Patient-Centered

Care

An Unwavering Focus on Patients “A critical foundation of [ACOs are their] unwavering focus on patients. We envision that successful ACOs will honor individual preferences and will engage patients in shared decision making about diagnostic and therapeutic options.”

Dr. Don Berwick, Administrator, Centers for Medicare & Medicaid Services

New England Journal of Medicine

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Source: European Society of Cardiology, “Guidelines on Myocardial Revascularization,” available at: http://www.escardio.org/guidelines-surveys/esc-guidelines/GuidelinesDocuments/guidelines-revasc-FT.pdf, accessed October 9, 2010; Marketing and Planning Leadership Council research and analysis.

Enhancing patient-centered care requires delivering more “appropriate” care in addition to elevating patient experience. Hard-wiring appropriateness into care requires a system for selecting the best option for patients from among many potential paths. While guidelines provide one approach to optimizing choices, guidelines alone are insufficient. Hospitals must engage patients and multidisciplinary teams in treatment decisions, particularly with cases too complex for application of a simple guideline-based protocol. Risk stratification may enable hospitals to determine those cases that will benefit most from specialist collaboration.

European Cardiology Society New Standards for Treatment Selection

Orienting Toward Patients Integral to “Appropriateness”

Lack of confidence in accuracy of risk stratification Negative workflow implications

Element #1: Risk

Stratification

Element #2: Multidisciplinary Decision Making

• Emphasizes need for risk-stratification to inform decision making

• Discusses use of risk-stratification tool to facilitate benchmarking, comparative effectiveness assessments

• Recommends development of a “Heart Team” including medical cardiologists, interventional cardiologists, cardiac surgeons

• Encourages development of ad hoc PCI criteria

• Promotes multidisciplinary review of patients with stable CAD, multi-vessel or left main disease

Element #3: Informed

Patient Consent

• Highlights need for informed patient consent, shared decision making when controversy over treatment options

• Recommends inclusion of contact information for physician offering alternate procedure

Heightened competition between specialists can spur defensive position, especially for prospective conferences

Consent forms designed to address legal concerns, not educate patient

Challenges Challenges Challenges

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© 2011 The Advisory Board Company • www.advisory.com 57 Source: Oncology Roundtable 2007 Patient Experience Survey; Marketing and Planning Leadership Council interviews and analysis.

Multidisciplinary care improves treatment, but also can improve patient satisfaction. Patients want their physicians working together, collaborating on treatment decisions and coordinating care. A survey of cancer patients, for example, found that patients rate multidisciplinary care as more important than many other potential patient satisfiers. The importance of multidisciplinary care will likely only grow as treatment options proliferate and more patients grapple with multiple comorbidities.

Patients Prioritize Need for Multidisciplinary Care

Multidisciplinary Care the Hallmark of Patient-Centeredness

Mean Service Importance Scores for Cancer Patients

n=750

1.6

1.8

2.3

2.4

2.9

3.3

3.6

4.3

5.2

9.8

10.0

14.2

19.0

19.7

Onsite Shops

Social and Mental Health Services

Parking

Patient Education

Family Support

Complementary Medicine

Financial Guidance

Religious Services

Survivorship Services

Information Management

Community Offices

Navigation

Symptom Management

Multidisciplinary Care

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© 2011 The Advisory Board Company • www.advisory.com 58 Source: Marketing and Planning Leadership Council interviews and analysis.

Hospitals face the opportunity of choosing from among four applications of multidisciplinary care. As discussed elsewhere, hospitals have the option to leverage high-level collaboration to develop evidence-based protocols and standardize care. Once hospitals set standards, multidisciplinary teams can meet to choose and plan treatment along pathways for the most complex patients. Organizations might also apply multidisciplinary approaches in delivering the therapy itself, completing cross-specialty procedures. Finally, multiple specialists may collaborate in ongoing management or unrelated acute therapies for patients with chronic diseases.

Four Applications of Multidisciplinary Collaboration

Encouraging Collaboration Across Disease Pathways

Diagnosis and Treatment Planning

Treatment Chronic Disease Management

• Physicians from different disciplines collaborate to determine appropriate diagnosis, treatment plans for patients

• Driven by high volumes, acuity, complexity of patients, multiple treatment options

• Ex. Spine Center Triage

• Physicians from different disciplines aid each other in performing procedures

• Driven by technological and procedural advancement

• To be determined through technological, procedural advances

• Ex. Transcatheter Valve Implantation

• Physicians from different disciplines manage a patient’s condition in conjunction with one another

• Driven by chronic nature of conditions, multiple treatment options

• Ex. Diabetic Patient Management

Appropriate Care Efficient Care Coordinated Care

Pathway Standardization

• Physicians from different disciplines collaborate to create standardized care pathways for various disease states

• Driven by need to reduce variability, provide highest quality care

• Ex. Heart Failure Readmission Plan Development

Evidence-Based Care

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© 2011 The Advisory Board Company • www.advisory.com 59 Source: Oakwood Healthcare, Dearborn, MI; Saint Barnabas Health Care System, West Orange, NJ; Marketing and Planning Leadership Council interviews and analysis.

While oncology programs have long employed multidisciplinary treatment planning, programs like cardiovascular and spine have begun to employ the “tumor board” concept. These multidisciplinary committees have been established to ensure that complex patients’ treatment plans are peer-reviewed to ensure due consideration of all options. St. Barnabas in New Jersey instituted the tumor board paradigm in its valve center. The valve center’s multidisciplinary physicians meet once a week to discuss complex, valve cases and determine appropriate treatment plans. In anticipation of FDA approval of transcatheter valves, the institution has already established the committee that will be charged with deciding which patients are most appropriate for this expensive treatment option.

Other Service Lines Mimic Tumor Board Approach

Not Just an Oncology Concept

Frequency of Meetings

Purpose

Physician Participants

• To determine treatment plans for cancer patients; separate boards held for different cancer types

• Meeting frequency correlated to volume of cases identified for multidisciplinary care

• Medical oncologist • Surgical oncologist • Radiation oncologist • Additional physicians

dependant on cancer type

• To determine treatment plans for complex valve cases

• Weekly meetings

• Cardiologists • Anesthesiologists • Echocardiographers • Cardiothoracic surgeons

Tumor Board Valve Center

Non-Physician Participants

• Clinical research nurse • Registrar • Nurse navigator • Social worker • Patient Navigator

• Cardiac fellows • Nurse practitioners • Clinical research nurse

Case in Brief: Saint Barnabas Health Care System

• Six-hospital health care system headquartered in West Orange, New Jersey

• Four to six valve cases reviewed by Valve Center team via teleconference each week

• Cases for review limited to those providing teaching value or necessitating discussion due to complexity

• Valve Center team includes physicians, anesthesiologist, echocardiographer, cardiac fellows, NPs

• Dedicated NP prepares presentation, tracks case

• Culture of engaged physicians minimizes push-back to initiative

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© 2011 The Advisory Board Company • www.advisory.com 60 Source: 2010 Oncology Roundtable Member Survey; Marketing and Planning Leadership Council interviews and analysis.

In addition to tumor boards, oncology programs have also pioneered the use of navigators as a way to promote coordinated and multidisciplinary care. Navigators connect with patients before treatment begins, either at the time of diagnosis or following an abnormal finding, and providing educational and psychosocial support throughout the patient’s treatment process. Currently, navigators’ primary role centers on care coordination tasks that intersect with quality. In the future, navigators may likely play a more active role in developing relationships with referrers and coordinating multidisciplinary conferences to heighten the degree of coordination among providers.

Navigators Support Patient, May Facilitate Collaboration in Future

Navigators Add an Additional Level of Coordination

96.7%

95.6%

87.6%

87.9%

82.4%

72.5%

48.4%

45.1%

35.2%

Patient Education

Connect Patients to Support Services

Help Patients Overcome Barriers to Care

Provide Emotional Support

Track Patient Progress

Develop Relationships with Referring Physicians

Coordinate Multidisciplinary Conference

Schedule Patient Appointments

Inform Patients of Test Results

Tasks Performed by Nurse Navigators in Cancer Treatment

n=91

Point at Which Cancer Nurse Navigator First Contacts Patient

n=90

23.3%

41.1% 5.6%

13.3%

14.4%

At Time of Diagnosis

Following Abnormal Finding

After Treatment Plan

Other

Referral to Program

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© 2011 The Advisory Board Company • www.advisory.com 61 Source: Marketing and Planning Leadership Council interviews and analysis.

Multidisciplinary care is not a new concept, but risk-based payment models will heighten the need for this collaborative approach. Hospitals face a significant challenge, though, in motivating physicians to work across specialties in caring for patients. Helping physicians find the time and motivation to collaborate will be key to success. Organizations may employ approaches that have worked well at institutions that have experienced initial success with implementation of multidisciplinary care.

Activities that Promote Multidisciplinary Care

Many Ways to Encourage Multidisciplinary Care

Activity Reason Example Use

1. Align payment incentives to goals

Ensures physician commitment to multidisciplinary care

Include multidisciplinary committee participation in physician contracts

2. Commit administrative support

Allocates resources to, prioritizes multidisciplinary process

Administrative participation in committees

3. Supply comprehensive internal and external data

Verify standards, treatment best practices

National benchmarks, studies

4. Determine mechanism for choosing cases

Agree on diseases, cases to receive multidisciplinary care

Algorithm, process

5. Use risk stratification tools Allow for multidisciplinary diagnosis SYNTAX, LACE index, PARR

6. Dedicate time, space Enables multidisciplinary meetings, surgery

Dedicated time, room for tumor board

7. Coordinate physicians with compatible skills

Ensures meaningful collaboration

Physiatrist, spine surgeon

8. Invest in technology Enables multidisciplinary care, surgery Hybrid OR

9. Build communication channels

Ensures ease of collaboration Teleconferencing capabilities

10. Provide navigators Facilitate coordination Dedicated navigators for program

Pathway Standardization

Diagnosis and Treatment Planning

Treatment Chronic Disease

Management

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© 2011 The Advisory Board Company • www.advisory.com 62 Source: Marketing and Planning Leadership Council interviews and analysis.

VIII. Directing Patients to “Right” Site of Care

Although health care reform centers on elevating quality and patient-centeredness of care, hospitals will also need to increase their efficiency. One important aspect of efficiency will be directing patients to the “right” site of care. Patients who receive care in a higher-cost setting than necessary tie up valuable resources that hospitals could otherwise use for more profitable cases. Thus, when patients poorly choose their site of care, hospitals experience lower capacity and margins. In addition, patients treated in higher-cost settings of care more often receive more aggressive therapies than necessary.

Four Negatives to Using Wrong Care Site

Providing Care in the “Wrong” Setting a New No-No

Reduced Margins Compromised Quality Inefficient Operations

• Denials, penalties due to increased payer scrutiny over appropriate patient placement

• Over-use of high acuity settings negatively impacts margins

• Delayed initiation of treatment due to inappropriate placement

• Reduced adherence to evidence-based practices due to limited access to resources

• Unnecessary transfers increase resource utilization, hamper continuum of care

• Patient admissions delayed due to limited availability of resources

Overutilization of Care

• Underutilization of conservative care

• Choosing care more invasive than necessary

• Duplication of care already provided

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© 2011 The Advisory Board Company • www.advisory.com 63 Source: Marketing and Planning Leadership Council interviews and analysis.

To triage care to the most appropriate site, hospitals can employ a three-pronged approach. First, hospitals have the option of directing patients to the appropriate level within the organization. This could mean performing procedures on an outpatient rather than inpatient basis, or rationalizing care between tertiary facilities and community hospitals within a system. Organizations may leverage an effective ambulatory strategy to maximize the number of patients treated outside of the hospital setting altogether. Finally, hospitals could increase preventive offerings, mitigating the necessity of care.

Often, the “right” site of care is also the lowest cost care setting. In some instances, this may actually increase margins by lowering direct costs. In many cases, however, triaging patients to lower cost settings yields lower revenue and, thus, lower margins. Though the Shared Savings program may reward providers for such cost savings, hospitals not participating in the program will need to backfill with profitable procedures in order to reap benefits if patients are triaged to lower revenue settings.

Three Paths of Deflected Acute Care Demand

Goal: More Appropriate Acute Care Utilization

Demand Treated Outside Hospital

Demand Triaged to Appropriate Level

Demand Prevented

Deflected demand is treated out of the acute

environment

Deflected demand is treated at a lower-

acuity setting

Deflected demand does not occur

• Preventative, wellness services

• Screenings • Primary care

interventions

• Emergent department versus urgent care

• Hospital-based treatment versus Ambulatory management

• Inpatient versus outpatient

• AMCs versus community hospital

• Hub versus spoke facility

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© 2011 The Advisory Board Company • www.advisory.com 64 Source: Marketing and Planning Leadership Council interviews and analysis.

1 Pseudonym. 2 Recovery Audit Contractor. 3 Electrophysiologist. 4 Relative Value Unit.

One institution employed patient triage to appropriate sites of care in response to pressure from a RAC audit. Changes led pseudonymed McGovern Health System to embrace the “right care, right time, right place” mantra across the entire system. This focus led McGovern to try to triage patients to the lowest acuity site possible. Sometimes this requires care at the academic flagship, but in other cases it means steering cases to a community hospital. A McGovern administrator said, “Fundamentally, what we want to do is make certain that we do not do a low-reimbursement case in an environment that is simply too expensive because it is structured to handle much higher acuity cases.”

McGovern electrophysiologists use Heart Rhythm Society guidelines for appropriateness to determine which cases meet inpatient criteria and perform those at the academic center. The same EPs, though, take outpatient cases to the community hospital, and their incentives are designed to encourage performing cases in the community setting.

McGovern Health System’s¹ Response to RAC

RAC Audit Revenue Risk Prompts Site-of-Care Shift

Outpatient Cases Shifted to Community Setting

• IP procedures performed at tertiary institution

• Dollar per RVU⁴ devalued for on-site OP procedures, effectively making OP procedures performed at AMC less profitable for physicians

Academic Medical Center

• OP procedures performed in lower-acuity setting

• Cases efficiently managed out within 24 hours

• Physicians compensated with full value professional fees plus community-setting stipend

Community Hospital

• Spurred by RAC² audits, institution fosters clear guidelines for inpatient (IP) versus outpatient (OP) admission for ICD implants based on Heart Rhythm Society indications

• EP³ triages patient to IP or OP procedure based on indications

• Same physician performs procedure regardless of site of care

Physicians Determine Inpatient/Outpatient Need Based on Guidelines

Case in Brief: McGovern Health System¹

• Multi-hospital health care system located in the Northeast

• Guidelines approved by compliance, billing, care management departments

• EP triages patient during in-office visit using guidelines which include 10 to 15 clinical criteria, patient history, comorbidities, clinician expertise

• Tertiary medical center takes complex, high-risk, high-value inpatient cases such as coronary artery bypass grafting, biventricular, dual-chamber or inpatient ICD implants, structural heart program

• Community hospital resources free for chronic care/routine outpatient procedures such as routine joint replacement, diagnostic catheter, simple or outpatient ICD, pacemaker implants

• Patient buy-in garnered by branding community hospitals as system partners, ensuring McGovern Health System quality, operational control

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© 2011 The Advisory Board Company • www.advisory.com 65 Source: Marketing and Planning Leadership Council interviews and analysis.

Under Shared Savings-type models triaging between care sites may be appealing, but it won’t be sufficient to maximize any bonus available for lowering utilization. Ultimately, hospitals may need to help patients avoid acute care in the first place. Existing incentive structures reward providers for offering the most expensive option even absent definitive evidence that it’s the optimal option from a clinical standpoint. Scrutiny of such choices is mounting in areas like spine care and may eventually force hospitals to look for ways to promote more conservative options. Infrastructure like multidisciplinary spine centers—originally designed to promote volume growth—may help hospitals encourage less-costly therapies.

Opportunity to Promote Conservative Care Through Triage Protocol

Differentiator for Today, Imperative for Tomorrow?

Inside the Comprehensive Spine Center

Physicians collaborate to determine optimal

course of care

Surgical candidates referred for initial

consult

Patients not meeting surgical criteria referred for

outpatient treatment at spine center or back to PCP

Post acute care coordinated by dedicated spine

coordinator

Physical Therapy

Occupational Therapy

Follow-up Primary Care

Patients use single entry point and are evaluated

and triaged

Surgery performed in dedicated OR with

dedicated staff

Some spine centers require patients to complete diagnostic tests before seeing a spine surgeon; others allow initial surgeon consults based on qualitative evidence communicated at intake

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© 2011 The Advisory Board Company • www.advisory.com 66 Source: Marketing and Planning Leadership Council interviews and analysis.

Institutions looking to aggressively promote conservative care have used the spine center infrastructure to tighten the access to surgical treatment. Some have created strict decision algorithms for triaging patients between conservative and surgical care. Many institutions are employing physical medicine specialists to evaluate patients before referring them to spine surgeons. Some have taken an even more aggressive approach, though. Marshfield Clinic, the most successful site in the Physician Group Practice Demonstration, triages all spine patients to a dedicated back pain primary care physician, essentially creating a back pain medical home. A dedicated primary care physician helps avoid the bias that even physiatrists or physical medicine specialists may have toward interventional pain procedures.

Measures to Ensure Evidence-Based Decision Making in Spine Center Triage

Stricter Pathway, More Conservative Care

• Pre-authorization • Decision algorithms • Risk stratification tools • Triage software • Dedicated call center nurse Li

kelih

oo

d o

f C

on

serv

ati

ve

Ap

pro

ach

Likelihood of Appropriate Volumes

Rotating Surgeon

Dedicated Physiatrist

Dedicated PCP

Frontline Physician Bias Risk

Call Center Components to Ensure Appropriate Triage

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© 2011 The Advisory Board Company • www.advisory.com 67 Source: Virginia Mason Medical Center, Seattle, WA; Kenney C, Transforming Health Care, New York, Productivity Press, 2011; Marketing and Planning Leadership Council interviews and analysis.

Rigorous application of pathways that help patients avoid aggressive and costly therapies can yield significant results. Virginia Mason Medical Center, an early proponent of pursuing LEAN production methods and assuming risk-based payment, re-designed their spine pathway in 2007. Since then, they’ve seen a measurable impact on downstream care. Virginia Mason only orders MRIs for 8 percent of back pain patients, compared to the 43 percent found among 200 hospitals in a comparison study. By providing same-day access to the spine clinic care team, they’ve streamlined the care pathway for back pain patients, and triaged care to the most appropriate team member.

Virginia Mason Pathway Redesign

Showing Measurable Impact on Downstream Care

New Care Guidelines

Uncomplicated cases seen by physical therapist, with brief review by physiatrist

All physicians have access to imaging results; duplicate imaging virtually eliminated

Physical therapy discontinued promptly upon return to function

Provides same-day access to care team to substitute for MRIs in clinically-appropriate cases

Spine Clinic Team

31% Reduction in MRIs

from providing same-day physician therapy

8% Percent of MRIs

ordered at Virginia Mason

43% Percent of MRIs

ordered at 200 other hospitals in study

Case in Brief: Virginia Mason Medical Center • 300-bed medical center located in Seattle, Washington

• Re-engineered care delivery for conditions of high cost to employers based on Toyota’s production methods and evidence-based medicine

• Provided same-day physician therapy appointments to 2,000 patients in 2007, cutting the number of MRIs by one-third

• Ordered MRIs in 8percent of cases compared to 43 percent at 200 outside hospitals in study

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© 2011 The Advisory Board Company • www.advisory.com 68 Source: Priority Consult, “Testimonials,” available at: http://www.priorityconsult.com/testimo.php, accessed March 20, 2011; Marketing and Planning Leadership Council interviews and analysis.

Hospitals must guard carefully against reducing utilization too quickly, especially if financial incentives have yet to catch up. Even after wider adoption of shared savings, hospitals will continue to face incentives to grow volumes. The goal of shared savings is merely to slow growth of per capita spending. Hospitals that use the transition to shared savings to increase efficiencies may find that surgeons can actually increase volumes. The key is to set a higher bar for determining which patients are offered and receive surgery.

Software Helps Surgeons Limit Consults to Most Likely Surgery Candidates

Efficiency Gains Enable More “Appropriate” Surgeries

Triage Software Benefits

Stage in Triage

Process Activity

Referral Intake specialist receives telephone call from patient or referring physician’s office

Patient Intake Intake specialist contacts, collects subset of medical history, inputs data into triage software

Triage Determination

Physician or triage specialist reviews patient health information, diagnostics, makes triage decision

Appointment Setting

Coordinator or navigator contacts patient, communicates care path, schedules appointments

5:1

2:1

Pre-Software Post-Software

Surgeons’ Consult-to-Surgery Ratio

Case in Brief: Priority Consult, LLC

• Health care solutions company based in Cincinnati, Ohio

• Creates specialized software platforms for patient management based on patient-centered nurse navigation models

• Applications include Priority Consult for Spine Practices, Priority Consult for Spine Centers and, Priority Consult Breast Care

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© 2011 The Advisory Board Company • www.advisory.com 69 Source: Marketing and Planning Leadership Council interviews and analysis.

Accountable payment will require hospitals to promote efficient and appropriate care beyond their own four walls. Many reforms will fundamentally shift the definitions of “quality” and “cost.” Service lines will play a key role in furthering the aims of these new definitions. In part, service line purview will eventually need to expand beyond its traditional acute care focus. While value-based purchasing and some bundling models remain focused on inpatient acute care, many new payment models will require service lines to develop partnerships with post-acute and chronic care providers. Shared Savings will push coordination even further, requiring service lines to consider pre-acute services.

Purview of Payment Methodology Incentives

Reforms Forcing Us to Widen Our Lens

Payment Methodology Value-Based Purchasing ACE Bundling Readmissions Penalties Episodic Bundling Shared Savings

Pre-Acute Hospital Post-Acute Chronic Care

Quality Cost

Quality Cost

Quality Cost

Quality Cost

Quality Cost

Quality Cost

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© 2011 The Advisory Board Company • www.advisory.com 70

Source: “The 2009 National Healthcare Quality Report”, AHRQ, available at: http://www.ahrq.gov/qual/nhqr09/nhqr09.pdf, accessed October 25, 2010; Marketing and Planning Leadership Council interviews and analysis.

1 Worse: negative change >1%/year, no change: change <1%/year, better: positive change 1-5%/year, much better: positive change >5%/year.

2 Agency for Healthcare Research and Quality. 3 United States Department of Health and Human Services.

Medicare’s push to broaden hospitals’ focus is not surprising. Looking beyond the acute care setting shows numerous gaps in the care patients currently receive. Recent data from AHRQ show that despite some improvements, progress continues to be slow. The data indicate that quality performance in preventive care and chronic care management lag behind inpatient care. For chronic care, performance on a third of measures actually decreased from 2008 to 2009.

Prevention and Chronic Care Lagging

Quality Gains Skewed Inpatient

Change in Quality Measures by Setting1

National Health Care Quality Report Measures

2008-2009

9% 31%

25% 33%

23%

47%

7%

15%

19%

60%

31%

Preventive Care Acute Care Chronic Care

Worse No Change Better Much Better

Study in Brief

• AHRQ2/HHS3 annual report to Congress on the progress and opportunities for improving health care quality

• Over 200 measures assessed across effectiveness, patient safety, timeliness and patient centeredness

• Analyzed rate of change in quality, finding that overall quality is improving but at an unimpressive rate

• Across settings, progress is uneven: acute care improvements far outpace preventive and chronic care

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© 2011 The Advisory Board Company • www.advisory.com 71 Source: Marketing and Planning Leadership Council interviews and analysis.

IX. Formalizing Relationships with Post-Acute Care

Standardize Referral Protocols

Facilitate Ongoing Communication

Enable Data Sharing

Track Patient Follow-up

Hospitals’ role in correcting deficits in ambulatory care quality begins by examining post-acute care (PAC). With readmissions penalties looming, improving both coordination with PAC providers and quality of PAC will become an imperative for hospitals. Hospitals participating in episodic bundling programs will see an even greater need for partnerships with PAC providers.

Keys to collaboration with PAC providers include: standardizing referral protocols, tracking patient follow-up, sharing data and facilitating ongoing communication. Service line leaders will need to proactively build a bridge with their PAC colleagues, partnering with these providers to reduce preventable readmissions.

Four Components Essential to Service Line Partnerships with PAC Providers

Readmission Risk Under Direct Purview of Service Line

Standardization of referral protocols ensure rapid placement of patients in appropriate PAC settings

Acceptance tracking generates data for future conversations between service lines, PAC facilities

PAC facilities must regularly report quality metrics to ensure continued eligibility in affiliation networks

Attendance at ongoing meetings in conjunction with reactive communication necessary

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© 2011 The Advisory Board Company • www.advisory.com 72 Source: Marketing and Planning Leadership Council interviews and analysis.

X. Exercising Caution with Service Line-Specific Prevention Efforts

Beyond post-acute care, service lines’ role in ambulatory settings remains murky at best. For example, service lines might offer some preventive services, but will likely play only a limited role in prevention. Other than screening services, primary prevention of acute episodes is less of a priority for service lines than is secondary prevention for those patients already diagnosed with a disease. Even secondary prevention is often concentrated in the primary care setting with pharmaceutical management and lifestyle modifications and much more closely aligned with medical home models than service lines for now. For the service line, then, prevention focuses mostly on screening efforts, patient education and coordination with medical homes.

Opportunities for Prevention within Service Lines

Limited Role for Service Lines in Prevention

Intervention Cardiovascular Orthopedics Neurosciences Oncology

Lifestyle Modifications

Pharmaceutical Interventions

Patient Education

Screening

Focus All of the above Lifestyle

modifications Patient education Screening

Opportunity for disease prevention

Opportunity for disease prevention within the service line

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© 2011 The Advisory Board Company • www.advisory.com 73

Source: Maciosek MV, et al., “Greater Use of Preventive Services In U.S. Health Care Could Save Lives At Little Or No Cost,” Health Affairs, September 2010:1656-1660; Marketing and Planning Leadership Council interviews and analysis.

1 Cholesterol screening for men 35+, women 45+. 2 Health benefits of childhood immunizations deflated to fit graph.

Life-years saved greater than 1,000 per 10,000 people per year of intervention.

3 Measured in life-years saved per 10,000 people per year of intervention.

Even considering prevention efforts under a Shared Savings-type reimbursement model, hospitals will find little incentive to provide these services. Most preventive services that improve health end up increasing overall health care spending. And the few preventive services that result in net cost savings are best provided in primary care settings.

Cost-Saving Prevention Limited to Primary Care

Investing in Prevention to Lower Health Spending

Life-Years Saved Versus Annual Net Medical Costs from Preventive Services

Medical Cost Savings Per Person

Health Benefits³

High Health Benefit, Incurs Cost

Lower Health Benefit, Incurs Cost

High Health Benefit, Cost Saving

Lower Health Benefit, Cost Saving

Childhood Immunizations²

Discuss Daily Aspirin Use

Breast Cancer Screening Cholesterol Screening1

Colorectal Cancer Screening

Hypertension Screening

Vision Screening (adult)

Pneumoccocal immunizations

Obesity Screening

Cervical Cancer Screening

Smoking Cessation

Osteoporosis Screening Depression

Screening

$0

20

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© 2011 The Advisory Board Company • www.advisory.com 74 Source: Marketing and Planning Leadership Council interviews and analysis.

Beyond screening, ambulatory clinics provide service lines an opportunity for increasing upstream care. As the market has become more competitive, institutions have progressively moved upstream to capture patients earlier and differentiate their services. Ambulatory clinics’ goals range across the disease pathway from educating patients prior to procedures all the way to actually preventing disease. Hospitals are establishing or partnering with such clinics even absent payment reform as a means for seeking to capture business further upstream.

Selected Access Points for Service Line Involvement in Upstream Care

Move Upstream for Market Capture, Not Cost Savings

Preventing Disease

Clarifying Diagnoses

Ensuring Appropriate Pathway

Preparing for Acute Procedure

Women’s Health Clinic

• Centralized service for women’s health and imaging

• Provides screenings and diagnostic services such as mammography, weight loss counseling

Headache Clinic

• Consultative service where patient provided with course of treatment

• Patient then referred back to PCP for long-term management of the condition

Spine Clinic

• Hired medical specialist into neurosurgery department

• Physiatrist triages patients to appropriate care

Bariatric Surgery Clinic

• Medical weight management, psychology evaluation, exercise therapy provided in preparation for surgery

• Pre-surgical weight control may help patients post-surgically

Upstream Peri-Procedural

Heart Failure Clinic

• Services to aid patients identified to be high risk for heart failure

• Goal to manage health, instill behavior change allowing patient to avoid acute episode

Preventing Acute Episodes

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© 2011 The Advisory Board Company • www.advisory.com 75 Source: Marketing and Planning Leadership Council interviews and analysis.

Wellness programs tend to be more similar than different across service lines. Thus, before making large-scale investments in wellness and prevention, hospitals should consider potential synergies across patient populations that would create economies of scale in facility investments and staffing. Looking at two examples highlights the potential synergies between wellness programs: Intermountain Medical Center’s orthopedic specialty hospital offers a wellness program for osteoarthritis patients. The program, designed to help patients avoid joint replacements, includes resources like water aerobics, nutrition and cooking classes; counseling; and arthritis education with a physician. Baylor Health Care System offers many of the same services in its wellness program, but the program focuses on high-risk diabetics in an underserved community.

Overlap Between Specialty-Specific Wellness Programs

Consolidate Large-Scale Investments in Wellness Facilities

Case in Brief: Intermountain Medical Center • 22-hospital system, including TOSH,

The Orthopedic Specialty Hospital

• TOSH administers wellness program for osteoarthritis patients to avoid joint replacement surgery

• Offers fitness, nutrition, life management classes, as well as consultations with physicians

Case in Brief: Baylor Health Care System • 26-hospital system, including Diabetes

Health and Wellness Institute

• Operates a community-based care program for diabetes patients

• Offers fitness, nutrition, glucose monitoring classes, as well as consultation with physicians

Possibilities for Sharing Resources Among Wellness Programs

• Shared facilities

• Certain staff

• General fitness classes

• General nutrition classes

Areas of Wellness that Should Remain Tailored to Patients

• Disease-specific counseling

• Disease-specific nutrition

• Patient cohorts by Disease

• Physician-led classes

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© 2011 The Advisory Board Company • www.advisory.com 76

Source: Poolman RW, et al., “Outcome Instruments: Rationale for Their Use,” The Journal of Bone and Joint Surgery, 2009: 41-49; QualityMetric, “Dartmouth-Hitchcock Spine Center- Changing Clinical Practice with the SF-36 Health Survey,” available at: http://www.qualitymetric.com/Portals/0/Uploads/Documents/Public/Changing% 20Clinical%20Practice%20-%20Dartmouth-Hitchcock%20Spine%20Center%20Case%20Study.pdf, accessed March 9, 2011; Marketing and Planning Leadership Council interviews and analysis.

XI. Waiting for National Registries Before Pursuing Long-Term Outcomes Tracking

Over time, hospitals will need to begin tracking long-term outcomes to further refine patient pathways and promote the most cost effective care options. Medicare emphasizes this point in the Shared Savings Program: “Over time, scoring methodologies should be more weighted towards outcome, patient experience, and functional status measures.” For now, though, hospitals may want to limit outcome tracking efforts to surveys of patients undergoing elective (and controversial) procedures that may be receiving scrutiny from payers. Progressive spine programs, for example, are conducting outcomes surveys to track functional status improvements.

Benefits and Drawbacks of Survey Methods

Track Survey-Based Outcomes for Elective Procedures

Survey Type Description Benefits Drawbacks Examples

Functional Outcomes

• Measures condition-specific functionality

• Brief, self-administered measurements

• Many options available

• Few options considered valid, reliable

• Time consuming

• ODI1

• RMDQ 2

Patient Satisfaction

• Measures patient-perceived health, wellbeing

• Survey can be interpreted more broadly

• Includes physical, mental, social factors

• Subject to patient bias

• Expensive • Time consuming

• SF36 3

• Sickness Impact

• Nottingham Health Profile

Value of Survey Applications in Practice

“Patient-reported outcome surveys provide us with a lot of information that we would otherwise never be able to learn…Without the survey, we can’t compare the patient over time in terms of functional status. We can’t compare the patient to other patients, and we can’t understand the outcomes of our interventions.”

William Abdu, MD, MS Medical Director, Dartmouth-Hitchcock Spine Center

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© 2011 The Advisory Board Company • www.advisory.com 77 Source: Paxton E, et al., “The Kaiser Permanente National Total Joint Replacement Registry,” The Permanente Journal, 2008, 12: 12-16; Marketing and Planning Leadership Council interviews and analysis.

1 Total knee arthroplasty.

Ultimately, robust clinical data is more actionable than survey data. Hospitals will need such data in moving toward total cost accountability so that they can apply the right treatments to the right patient populations. Yet, until national comparative effectiveness efforts yield better clinical evidence, hospitals will often need to make decisions based on limited data. Addressing this gap, Kaiser Permanente created a total joint replacement registry to track long-term outcomes for these high-volume, high-cost procedures. Analyzing the registry, Kaiser found higher pain associated with minimally invasive total knee replacements when compared to traditional total knee replacements, leading Kaiser to discourage use of the minimally invasive procedure among its surgeons.

Kaiser Permanente Analysis of Total Joint Replacement Registry

Long-Term Registries Capable of Redirecting Care

Reduction in Minimally Invasive TKA¹ Procedures

0

5

10

15

20

25

A B C D

by Kaiser Permanente Facility

Number of

Minimally Invasive

TKAs¹

Facility

2006 – After Registry Analysis

Pain Score by Knee Replacement Technique

Pain Score

<6 Weeks 7-12 Weeks

5

3

1

Traditional TKA¹

Minimally Invasive TKA¹

2005 – Before Registry Analysis

Case in Brief: Kaiser Permanente Total Joint Replacement Registry

• 35-medical center national integrated managed-care consortium headquartered in Oakland, California

• Total joint replacement registry (TJRR) designed as national level database for post-market surveillance for elective total hip, knee replacement

• Data collected by surgeons, medical assistants, RNs through standardized total joint replacement preoperative, operative, postoperative documentation forms; clinical data supplemented with administrative data

• As of 2007, the TJRR recorded 16,945 primary total hip arthroplasties, 2,144 revisions, and 30,815 TKAs

• TJRR has provided mechanism for recalls, identified patients at risk for early revisions, changed practice by providing feedback to physicians

• Registry identified higher amounts of pain associated with minimally invasive total knee arthroplasty versus traditional total knee arthroplasty

• Results include reduced minimization of minimally invasive knee replacements due to relationship between minimally invasive technique, pain

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Source: “AAOS Now,” available at: http://orthodoc.aaos.org/ajrr/AJRR%20AAOS%20Now%20Article_Jan%202011.pdf, accessed March 31, 2011; “2010 STS PQRI Registry Submissions,” available at:

http://www.sts.org/sites/default/files/documents/pdf/ndb/Text_for_website_-_2010_PQRI_-_December_14.pdf, accessed March 31, 2011; Cox JL, “The Challenge with Tracking Health Outcomes,” Canadian Journal of Clinical Pharmacology, 2001, 8: 10A-16A; Marketing and Planning Leadership Council interviews and analysis.

Clinical registries, however, require funding and coordination capabilities that many hospitals currently lack. Though some programs are betting that the upfront investment will yield returns under a shared savings model, most hospitals are better served waiting for development of national registries. As the market shifts toward needing to track long-term outcomes, more options will come online. For example, the American Academy of Orthopedic Surgery is in the process of piloting its own joint replacement registry with 16 AMCs and hospitals. Member hospitals will be able to access data that will preclude the need for an individual registry. Existing cardiovascular registries will likely adapt to track longer term outcomes as well. As these registries become more widely available, the costs for hospitals associated with long-term outcomes tracking should decrease.

Existing Registries in Service and Development

Wait for National Long-Term Registries to Come Online

• Establishes infrastructure, uniform system for collecting device information, monitoring outcomes of total joint replacement in U.S.

• Preparing to launch a registry pilot at 16 AMCs, hospitals

American Academy of Orthopedic Surgeons

American Joint Replacement Registry

• Tracks appropriate use data related to ICDs, cardiac catheterizations, congenital treatments, acute coronary syndrome

• Encompasses both hospital-based registries and practice-based program

American College of Cardiology

National Cardiovascular Data Registry

• Standardizes information on cardiac, thoracic procedures

• Includes 686 surgeons, over 14,000 Medicare fee-for-service cases as of 2009

Society of Thoracic Surgeons

National Adult Cardiac Registry

The Challenge with Tracking Health Outcomes

“Rising health care costs, questions about the effectiveness of medical interventions and demands for greater accountability and efficiency… have led to a growing interest in using patient outcomes as a primary measure of the quality of care. However, measuring outcomes is complex and expensive given the widespread lack of an integrated and comprehensive electronic health information system.”

J. L. Cox Department of Medicine and Community Health, Dalhousie University

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