New Marketplace

Innovation Doesn’t Have to Be Driven by Profit

Article · December 14, 2015

As health care reform evolves, large public institutions that offer a health safety net have some advantages over privately owned enterprises. That may sound counterintuitive, but it’s true.

For many years, private-sector providers and other business interests have responded to a combination of patients’ actual needs and market opportunities while trying to optimize earnings. When the type and amount of health services largely depend on independent providers’ discretion, care becomes more fragmented and costly. But large, publicly supported safety-net institutions are driven less by external payers and market forces, and more by patient and community needs — and clinicians often participate prominently in decision making. Those are all assets in an era of health care reform.

I head one of these institutions: Dallas-based Parkland Health and Hospital Systems. A county network of 12 community-based primary care clinics, 95 specialty clinics, an inpatient hospital, an ambulatory surgery center, and 12 skilled nursing facilities, Parkland has the mission of caring for all Dallas County residents regardless of their ability to pay. The medical staff is either employed by or contracted through our academic partner, the University of Texas Southwestern.

As a public safety-net provider, Parkland has several built-in advantages:

An ACO before ACOs existed. In recent years, the Centers for Medicare and Medicaid Services (CMS) has given hospitals, physicians, and other providers incentives to form accountable care organizations (ACOs), with responsibility for outcomes and costs held by a single entity rather than diffused across independent providers. Parkland has operated like an ACO since establishing its community-based primary care clinic in 1989 — out of necessity. Patients generally need proof of insurance to access outpatient clinics, and Parkland was serving a large volume of uninsured people as inpatients — so it extended preventive care and management of chronic conditions into the outpatient arena, much like an ACO. We still operate that way today.

A mission-driven payer mix. Parkland receives 36% of its hospital operating budget ($535 million in FY2016) from county funds, not for episodes of care (as in the insurance model) but to design and provide the best possible care for our population. Our patient mix — 48% uninsured, 30% on Medicaid — may scare hospitals that must turn a profit. But it greatly simplifies our decisions about what services to provide and how to organize them.  Other systems typically structure services according to a predicted number of insured patients and the rates they can secure from insurers. By contrast, nearly every program at Parkland “loses” money (if you think in typical hospital-finance terms). For example, our new tele-dermatology service allows patients to see dermatologists remotely and, therefore, more quickly, conveniently, and cheaply. However, because nearly half of our patients are uninsured, the service’s overall costs exceed revenues. In calculating return on investment, we don’t just do simple math — we figure out the most patient-centered, efficient way to spend our finite funds to care for our population.

Affinity for care coordination. In the 1990s, when many hospitals began acquiring physician practices to support earnings with a steady stream of hospital admissions, Parkland’s safety-net system was already creating a coordinated web of care. Our physicians and hospitals still share inpatient and outpatient electronic medical records, and they document measures of quality to ensure patients receive the best need-based care for the cost. Our CMS-reported hospital measures of quality for Medicare patients are comparable with state and national averages. And Medicare spends less per patient for an episode of care initiated at Parkland ($18,419) than it does across all hospitals nationally ($20,025).

Effective coordinated care must be team-based and span inpatient and outpatient settings. For example, our physician-led diabetes program sets standards of care throughout the institution, from establishing multidisciplinary group visits for outpatient chronic-care management to implementing standardized protocols for titrating inpatients’ insulin dosing to manage blood-sugar levels. This effort has reduced the average number of episodes of critically low blood sugar among all inpatients from 13 per month to less than one per month.  We improve care for patients like these (with diabetes and many other conditions) by using electronic decision support, tracking outcomes, and sharing the data with providers.

Ability to resist reimbursement pressures. In 2010, while overseeing Louisiana State University’s 10 public safety-net institutions, I faced an interesting dilemma. A physician-owner of a hyperbaric oxygen therapy (HBOT) program was relentlessly trying to get us to adopt this expensive treatment, even though for some of its common uses (such as foot ulcers) it has less proven benefit than cheaper therapies do. Yet a leading hospital-industry advisory group made this endorsement: “HBOT can be a substantial driver of volumes for not only a hospital’s wound care center, but also downstream lab, radiology, and surgery services.” That might make sense for a health system that is driven primarily by volume of procedures and reimbursement dollars, but not for ones like LSU and Parkland, which target limited resources to be maximally effective and efficient for patients. Unfazed by this kind of pressure, we simply declined.

Population-driven innovation. In 2009, on any given day, Parkland had about 20 patients who were in the hospital solely to complete a four- to six-week course of intravenous antibiotics. If they had Medicare or other insurance, they would go home and receive their medications with the assistance of a home health nurse. A Parkland physician developed a program to train uninsured patients and families to administer IV antibiotics at home, with regular follow-up in her clinic. By 2014, more than 1,100 Parkland patients had been safely treated this way. And the hospital readmission rate is now lower among the patients who have been trained to self-administer IV antibiotics than among patients with insurance who receive home health care assistance. The uninsured patients go home earlier than they used to, and the hospital has saved nearly $40 million. Imagine the cost savings if we applied this program nationally to all patients who need prolonged IV antibiotics.

Despite these advantages, operating as a public entity comes with challenges:

Limited resources to meet unrelenting demand. In 2011, Parkland added an urgent care center on its main campus to divert less-severe cases from the crowded emergency room. We now see 65,000 visits per year in our urgent care center, but our ER visits did not go down. That’s because Dallas’ overall population (including the uninsured segment) is growing and because our added capacity attracts patients who had been deferring needed care. Some of our specialty clinics have wait times of up to six months for new patients.

Uncertain planning. With nearly 80% of our patients either uninsured or on Medicaid (which pays below cost), we depend on county and state budget and policy decisions, which can change from year to year. Long-range (and even short-range) planning can be difficult under those conditions.

Patients who need more than health care. Being a safety-net provider means caring for people who face challenges in all areas of their lives — physical, mental, financial, and social. These patients often have exhausted all other health care options and may need resources as basic as food and shelter to ensure their well-being — resources that extend well beyond our walls.

Public health systems will always face obstacles like these. But they also know — from hardscrabble experience — how to serve diverse patient populations well at modest costs. As David Blumenthal and Sara Collins wrote in the New England Journal of Medicine in 2014, “Developing and spreading innovative approaches to health care delivery that provide greater quality at lower cost is the next great challenge facing the nation.” Large public systems have a leg up because they have been confronting this challenge for years.

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