It seems that current health providers are being asked to move from the “repair business” to the “prevention business”. Rather like asking the local auto repair shop to start building cars. It is simple to make statements about poor life style and what causes poor health but from there it is a huge leap to attempt change to human behavior. Particularly when individuals are surrounded by the very drivers of their own demise. It is an extraordinary burden to place on NFP hospitals.

Identify Significant Health Needs: The recent IRS proposed r e g u l a t i o n s a d d r e s s t h e requirement under Section 501(r)

(3) of the Internal Revenue Code (Code) require that tax-exempt hospitals conduct community health needs assessment every 3 years.

These regulations require hospitals to identify significant community health needs, prioritize those needs, and identify measures and resources required to address those needs. The hospital is allowed to determine significance based on the fac t s and circumstances and allow it to prioritize them by using any criteria that it deems appropriate.

The opportunity lies in that it may also collaborate with others in addressing those needs.

One is led to believe that at some point payment will be based on population health improvements.

Population health, in totality, cannot be laid at the feet of the local hospital but must be a community wide initiative. Schools, Government, urban designers and developers, and healthcare must collaborate in r e - d e s i g n i n g t h e v e r y communities people are living in. Walk-ability, public transport, access to fresh foods, clean air and water among others. This may be quite a contrast to to-day’s drive-able suburbia that needs multiple cars, is peppered with malls, fast food.

A number of health systems have already taken a unique approach to community inclusion. Such as can be seen in Jackson, MI where Allegiance Health has had the foresight to initiate a H e a l t h I m p r o v e m e n t Organization for developing new norms for the community … beyond patient repair.

Population Health — Whose job is it?

Does PCORI fit into your strategies ?

Unknown to many, the Affordable Care Act established a private, nonprofit corporation called the Patient-Centered Outcomes Research Institute ("PCORI"). Apparently the PCORI is intended to

assist patients, clinicians, purchasers and policy-makers in making informed health decisions by conducting and publicizing comparative clinical research findings.

To fund the new corporation, Congress established the Patient-Centered Outcomes Research Trust Fund. This trust fund is to be financed, in part, by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans. The first of those fees will be due July 31, 2013.

To see if your plans will be affected go to PCORI's website, it can be viewed at www.pcori.org.

Lund Byrne Associates

Summer 2013

Management Update

Contents in a

Nutshell:

Population Health—

whose job is it?

PCORI

Physician Leader-

ship responding to

the market

Is Standard & Poors

on target?

Helping Physicians and Hospitals to Collaborate

22747 VINE COURT : SUITE 100 : ROCKY RIVER : OHIO : 44116 : (440) 333-2921 : www.lundbyrne.com

Change

Management

The single biggest problem

in

communication is the illusion

that it has taken place.

George Bernard Shaw

Please direct all questions

and inquiry's to:

arbyrne@lundbyrne.com

440-333-2921

www.lundbyrne.com

Hip replacement is a surgical procedure in which the hip joint is replaced by a

prosthetic implant. It is generally conducted to relieve arthritis pain or treat

severe physical joint damage following

hip fracture. Ostheoarthritis is one of the ten most disabling diseases in developed

countries with the worldwide estimate of 10% of men and 18% of women aged

over 60 years will have symptomatic osteoarthritis. Age is the strongest

predictor of the development and progression of osteoarthritis. It is more

common in women, increasing after the age of 50 especially in the hand and

knee. While joint replacement surgery is mainly carried out among people aged

60 and over, it can also be performed

among people of younger ages.

Hip replacement surgery, incidence per

100 000 population, 2009 Germany 295.7

United Kingdom 193.6 United States 183.9

In 2010 Total hip replacements in the US were approx. 332,000 at a cost of

$7,490 million

Per patient costs varied between $25k

and $125K

Hip Replacement

Why hospitals should not be totally responsible for population health

The Cleveland Clinic

Lou Ruvo Center for

Brain Health in

Las Vegas

The 2012 Rating Agency’s Report sees

80% of stand-alone hospitals as

having stable outlooks. They note that

Hospital incomes will be flat followed by

a jump in utilization in 2014 caused by

Medicaid expansion and an increase in

covered persons as a result of the

Affordable Care Act. No mention here

of revenue jumps.

Perhaps what is surprising is they

did not seem to catch the fact that the Debt Burden as a percent of

Income is increasing. (Debt burden (%) Maximum annual

debt service/total revenue x 100.) They do note:

“In our opinion, the strong revenues belie many underlying operating challenges such as volume softness that most providers are still reporting due to patients deferring elective procedures amid economic challenges and a shift f rom i npa t ien t admis s i ons to observation status, which is worse from

a reimbursement standpoint. Also, al-though providers have been successful with operational improvements such as renegotiating supply contracts, lowering salary and benefit costs, and imple-menting lean principles into the hospital's operations, certain other costs have swelled.

The additional costs are largely related to greater fixed costs of physician employment and the expense of

developing and training staff for new electronic health record systems.”

While these expenses are real,

perhaps the rating agencies should have added that while utilization

will jump in 2014 it is likely there will be a great deal of chaos

occurring when the Health Insurance Markets are introduced

and States expand Medicaid coverage.

The chaos will become evident when many newly enrolled (and dis-

enrolled) patients will have little or no

comprehension of what their coverage

includes or the extent of their responsibility for personal costs and

co-pays.

Yes expect higher utilization but expect to struggle to get paid. Hospitals and

physicians with strong balance sheets and many days of cash on hand will be

best positioned to survive!

Lund-Byrne Associates

removed. These strategies are often limited to specific service lines and do

not cross all parts of the continuum of care.

The patient does not care that a physician is an independent contractor or employee what they care about is:

Speed to care

Access to the right care

Be treated with respect

Cost of care (or their contribution)

The move to holding service line medical directors more responsible for

the quality and operation of their services is a significant and beneficial

move. This responsibility must include cross service streamlining.

Today’s healthcare systems are looking more to team building that

includes physicians as clinical and administrative leaders.

The evolving healthcare market place is

expecting a high level of cross service collaboration that is necessary for a

seamless approach to managing an individuals health. No surprise, the

physician touches or influences all parts of the delivery of patient services.

What complicates things in getting their active collaboration is that physicians are the prime workhorses and revenue

generators. Hospital strategies that include co-management, Six Sigma or

medical directorships have enjoyed

successes but at some point run out of steam as the “low hanging fruit” is

The role of the physician is being enhanced and hopefully freed up as it

becomes that of a technical advisor to other providers (i.e.: NP’s/APN’s/

CRNA’s).

Rather than being the only person capable of delivering patient care the

physician trains, sets standards

monitors performance and works to improve the system. Patient care is

enhanced with greater focus on more chronic and severe illness.

In support of this evolution, the skills

required to manage the patient experience and “hand-off” must be

developed further and led by physicians who enjoy the

patient’s trust. “Be careful about

reading health

books. You may die

of a misprint.”

Mark Twain

22747 VINE COURT : SUITE 100 : ROCKY RIVER : OHIO : 44116 : (440) 333-2921 : www.lundbyrne.com

Standard & Poors Ratings - are they on target?

2.7

2.8

2.9

3

3.1

3.2

3.3

2006 2007 2008 2009 2010 2011

Debt burden to Income (%)Stand Alone Hospitals and Health Systems

Debt burden to Income (%)

Linear (Debt burden to Income (%))

Physician leadership responding to market forces