Hospitals eye making income through outcomes

Hospitals are gearing up to shift from relying on fees they charge patients to sustaining their organizations through contracts with other health-care providers and emphasizing preventive care as the federal government trims Medicare and Medicaid reimbursements.

The Obama administration, through the Patient Protection and Affordable Care Act, has sought to reduce the deficit, in part by reducing the amount it spends on Medicare and Medicaid, subsidized health-care programs for the elderly and the poor. The plan is to reduce spending here by $320 billion.

One program already under way fines hospitals for having too many patients return within a month for additional treatments. In all, 2,610 hospitals nationwide faced $428 million in fines last year when 18 percent of Medicare patients who had been hospitalized were readmitted within a month.

Even before health-care reform, hospitals run by Banner Health, including McKee Medical Center in Loveland and North Colorado Medical Center in Greeley, had taken a number of steps to lower costs.

“Everybody across the country to some degree is trying to figure out how to move into this focus on value, focus on delivering the right care at the right time at the right location,” said Dr. JP Valin, chief medical officer for Banner Health.

Banner Health has streamlined electronic-records systems and focused on preventive care, such as encouraging immunizations, tobacco screening and breast and colon cancer screenings, Valin said. Banner Health also has been recommending physical therapy for elderly patients susceptible to falls.

“A fall leads to a hip fracture, which leads to a hospitalization and a major surgery,” he said. “We’re trying to invest time and energy on the front end and hopefully preventing something on the back end.”

Additionally, hospitals run by Banner Health have entered into contracts with medical providers such as Humana Inc. (NYSE: HUM). The idea is to keep costs of service below a certain amount so the hospitals can make money to reinvest into their businesses.

Banner Network Colorado recently reached an agreement with Humana that focuses on more personalized care and wellness programs targeting preventive care, chronic conditions and disease management. Financial terms of the deal were not disclosed. Banner Health has similar agreements with UnitedHealth Group Inc. (NYSE: UNH), Cigna Corp. (NYSE: CI), Aetna Inc. (NYSE: AET) and others.

Dr. Kit Brekhus, physician director for Centura Health’s Colorado Health Neighborhoods, said the health-care provider has made the transition by entering into accountable-care organization agreements. Accountable-care organizations can share in Medicare savings they achieve when they deliver high-quality care. Additionally, the hospital has entered into an agreement with Aetna in which it bills per member per month instead of on a fee-for-service basis.

Englewood-based Centura has 15 hospitals, including Avista Adventist Hospital in Louisville; and six senior-living communities. Centura announced last year that Longmont United Hospital would become a member of its system. It also has opened wellness centers in Dacono, Westminster and Thornton.

“That notion of reimbursement for the number of procedures or the number of visits really has proven itself to be an inefficient model and really hasn’t moved our country forward in terms of improving quality or reducing costs,” Brekhus said.

University of Colorado Health, which operates Poudre Valley Hospital in Fort Collins and Medical Center of the Rockies in Loveland, also has sought to improve patient outcomes.

“The government is starting to focus more and more on the actual end-outcome,” said Ric Detlefsen, director of clinical quality and risk management at Poudre Valley Hospital. “We’ve been focused on those kind of methods for a long time, a lot of hospitals have, trying to improve those outcomes.”

But hospitals still mostly rely on fee-for-service models despite the push to reduce costs and improve outcomes, so many have struggled to adjust to the conversion as Medicare and Medicaid reimbursements decline.

“It truly is affecting hospitals nationally, ours included,” he said. “We’re talking about how can we be more efficient with what we have without patient care suffering. In that sense, it is a struggle.”

Despite the challenges of the conversion, hospitals know that quality care as opposed to fee for service is best for patients, both medically and financially.

“Doing more costs more,” Valin said. “Per capita spending on health care continues to grow and vastly outpace other industrialized countries, and yet our health outcomes … lag well behind other countries in the world.”

Steve Lynn can be reached at 970-232-3147, 303-630-1968 or slynn@bizwestmedia.com. Follow him on Twitter at @SteveLynnBW

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