The worries of a hospital CEO

June 16, 2014
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As I was working this month to nail down that Community Health Network and Eskenazi Health had, in fact, called off their highly touted partnership, I got hold of a presentation Community CEO Bryan Mills made in February to the leaders of his hospital system.

The 70-minute "State of the Network" presentation, which Community made available to employees via four videos, shows Mills talking candidly about where his hospital system is, where it needs to go and the biggest challenges it faces right now.

Those challenges are so great that Mills said he and his managers briefly discussed--though never seriously pursued--the possibility of laying off 1,000 people last summer because the system was barely breaking even until seeing a rush of patients in December. (Watch at about the 7:00 mark in the video below.)


 

The other major hospital systems operating in Indianapolis—Indiana University Health, St. Vincent Health and Franciscan Alliance—all announced layoffs of roughly 900 positions last year.

There are also new challenges emerging that threaten the foundation of a hospital system's business. Namely, hospital executives know the high-priced, low-convenience model they've been running for years is ripe for disruption from retailers and employers—organizations that, until now, have been only on the periphery of health care.

"If I asked you right now, who are our competitors who are the competitors of Community Health Network, I bet you would say IU Health, St. Vincent’s Health and Franciscan, primarily. Those are the three primary competitors," Mills said.

But then he set his listeners straight.

"Walgreens, Wal-Mart, CVS, employer clinics, Target, that’s who our competitors are," Mills said, saying the health care clinics operated by those entities are capturing more and more of the walk-in patient visits that physicians and hospital systems used to own. "We’ve partnered with Walgreens," Mills added. "We’re far better partnering than we are trying to compete. They’re not going to go away. They’re probably 50,000 times our size."

In addition to partnering, Mills also said Community would begin posting its retail prices and quality metrics for about 20-25 common retail items, such as physician office visits, a session of physical therapy, an MRI scan.

'There are about 20 to 25 items that people shop on these things, and we’ve got to be price competitive," Mills said. "And we’re not going to raise the prices on any of them. Guaranteed."

(You can watch these comments at the beginning of the video below.)


 

Employers are the other big threat to Community and hospitals like it. Mills said—and I have heard other health care executives say this too—that employers are increasingly looking to become active purchasers of health care. Until now, they have just been purchasers of discounts negotiated by health insurers such as Anthem Blue Cross and Blue Shield, the Indiana subsidiary of WellPoint Inc.

But that is changing, Mills said. He predicted employers would start operating their own private insurance exchanges for their workers. These private exchanges might present health plans selected via a bidding process among hospital systems or other groups of health care providers. The state of Indiana, which has about 36,000, is looking at this approach already, Mills said.

"These private exchanges are going to say, 'We’re going to take my 36,000 employees, and I’m going to start shopping for health care. These 36,000 people are going to need 100,000 office visits and 5,000 surgeries and 100 days in hospital. ... So I’m just going to line up all the people to provide this and say, "Give me a price."'"

"That changes health care like that," Mills added. (Watch at about the 6:00 minute mark in the Mills4 video above.)

But Mills thinks Community can adapt to that change by engaging directly with self-funded employers, not just by working through health insurers.

"We’re going to work with them. We’ve got to go hands on to make sure that works," Mills said of employers, saying Community would offer easier access and assign nurse managers to specific employers and their workers to improve the health of people with chronic diseases. "That’s a key piece of our strategy, is to make sure we form these direct relationships with the employee and their employees, and not just and make sure we get them through he insurer."

Mills said Community has a head start on other hospital systems, because it has pushed recently to ramp up patient access. In fact, Community was the only hospital system to see a general increase in patient volumes last year. (You can see Mills discuss Community's 2013 performance as well as his explanation of the breakdown in merger talks with Eskenazi, in the video below.)


 

But even the nature of "patient visits" is changing, Mills noted, with far more encounters happening via telehealth services or by providers going to work sites, retail clinics and other places that are more convenient for patients to receive care.

"Many of the patients that receive care in this system will never go to a facility. Never," Mills said in the video below. "And the ones that go to facilities, particularly inpatient, are going to be ones that are very, very, very sick. But that’s going to continue to be a shrinking market."


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  • Changes all around
    We are starting to see other medical facilities that are able to provide hospitals services. These facilities are able to provide those services a lower fee.
  • Top Decile?
    Top Decile means top 10 percent,...not top 1 percent. Still good,...but not as awesome as the CEO thinks he is. https://www.google.com/#q=decile
  • Surprised, anyone?
    Not sure why my prior comment was removed. Perhaps that I noted the AMA supported ObamaCare, only to learn (once it was apparently able to read the bill, after voting) that it would result in lower salaries for doctors and health care facilities? Or was it that I indicated the future of health care is dim and getting dimmer, sort of like the U.S. voter? This is, of course, because the low and falling reimbursements (and growing numbers expecting "free" healthcare -- which of course does not exist) will inevitably lead to fewer folks entering medical school. Hence, long waits for medical attention (if you can find any at all) and facilities closing due to all the "free" healthcare they must provide. Any wonder why Canadians come to the U.S. for prompt and attentive health care? Where can Americans go when OC is in full swing? If these comments are deemed offensive, I guess truthfulness is intolerable by the IBJ.
    • Video
      How did you obtain the video from Community? Did you request and receive their permission to post it? Is it unethical to use a video of a business leader talking to their employees and publicly publishing? I'm curious what your readers think about these questions following your responses.
    • Your comments are right on the money!!
      Elaine, I agree 100% with you. People in our country, by virtue of the Democratic Party-inspired belief that health care is a RIGHT, are going to see fewer and fewer docs on their insurance panels because of diminishing reimbursement rates. I hope that they feel the sting, truly. THEY ARE GETTING EXACTLY WHAT THEY DESERVE: NOTHING!! You want to pay nothing. No prob. You get nothing. Nothing from nothing leaves nothing. lol. I suspect that we are in for another long long overdue Republican revolution. Thank God.
    • Personal responsibility
      Far too long the hospitals have been able to dictate the rules. They can no longer pass on excessive marketing costs and fancy artwork to insured patients. Also, insured patients should not have to pay inflated rates to cover those without insurance.
    • Disruptive innovation
      Very interesting to see how technology is expanding the reach of medical care. Telehealth, retail clinics, employer sponsored clinics, private exchanges. Change is constant.

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