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spring 2016 | volume 9

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32211

Systemness

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©2016 The Advisory Board Company • advisory.com

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table of contents

SYSTEMNESS PRIORITIES | 8

Pursuing integration can mean diff erent things for diff erent organizations. Our survey of 150+ members revealed the four most critical and challenging integration goals.

BARRIERS | 12

John Johnston shares three examples where health systems are accelerating the integration of their service lines.

BIG ENOUGH FOR WHAT? | 4

Size and strength don’t always go hand-in-hand. Health systems’ growth goals should refl ect their plan for strategic positioning and consumer acquisition.

4 Big enough for what?A strategist’s approach to determining system size.

8 Providers’ top ‘systemness’ priorities for 2016 and beyond

12 Three barriers to achieving service line ‘systemness’

14 What Tide Pods tell us about health system strategy

16 7 ways to make systemness an asset in clinical standardization

18 What good is a value-based care network if patients can’t access it?

20 Banner Health’s approach to system-wide clinical standardization

24 Q&A: Sanford Health’s journey toward clinical standardization

28 Four takeaways from Intermountain on transforming the supply chain

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2 | Expert Perspectives spring 2016

Featured Writers

This issue’s contributing experts

Tom directs strategy and best practice research for hospital and health system executives across the nation on topics ranging from hospital finance to strategic planning and clinical service innovation.

[email protected]

THOMAS CASSELS

Executive Director

Ben Umansky is a practice manager with the Health Care Advisory Board research team. His principal areas of expertise include the economics of emerging payment models, changes in insurance markets, and the business case for consumer-oriented care.

[email protected]

BEN UMANSKY

Practice Manager

As a consultant with the Health Care Advisory Board team, Yulan conducts research and develops strategic guidance for hospital and health system C-suite members.

[email protected]

YULAN EGAN

Consultant

Lisa works as a senior consultant for the Health Care Industry Committee and oversees research focused on strategic issues impacting health care suppliers and service providers.

[email protected]

LISA PERLMUTTER

Consultant

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John Johnston, CPA, MHA, brings more than 20 years of experience to his role as senior vice president at Advisory Board Consulting and Management. John works with hospitals and health systems to improve their strategic direction, operational efficiency, and financial performance.

[email protected]

JOHN JOHNSTON

Senior Vice President

Bizzy is a senior consultant with the Advisory Board’s Spend Performance Solutions team, and is a subject matter expert on innovative tactics for cost reduction with a focus on service line strategy and clinical supply sourcing.

[email protected]

ELIZABETH “BIZZY” GOODMAN-BACON

Director

Laurie Sprung, PhD, MPH, serves as executive director of Advisory Board Consulting and Management and is responsible for overseeing the development and management of new programs and services, including the cultivation of new business opportunities for the firm within the areas of accountable care and overall physician alignment strategy.

[email protected]

LAURIE SPRUNG

Executive Director

MEGAN ZWEIG

Senior Consultant

Megan leads research projects for the Physician Executive Council, with a focus on engaging physicians in care transformation efforts. She spearheads the Council’s work on clinical standardization, physician communication, and physician engagement.

[email protected]


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654321A strategist’s approach to

determining system size.

Big enough for what?

BY THOMAS CASSELS AND BEN UMANSKY

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Size and strength don’t always go hand-in-hand

The last two business cycles in the health insurance and health services delivery industries created a simple scale advantage. We had the “managed care rebellion,” which ended with rapid growth in coverage for implantable devices in the early 2000s, and the “price-driven growth bubble,” which is now coming to an end. As a result, health care leaders have been operating with an understanding that bigger has always been safer for your balance sheet (give or take an Allegheny Health, Education, and Research Foundation or two).

Today, however, many health care leaders starting down the same path are questioning the much-touted economies of scale.

The real strength of any health system comes not from pure size but from more fundamental characteristics like the ability to attract top talent, finance strategic initiatives, and support a reliable experience for patients and staff (the primary drivers of quality outcomes in health care delivery). Size can support these ambitions, but it’s no guarantee. We see all too frequently that size can hinder these ambitions in organizations that lack “systemness.”

Moreover, the difference between success and failure for large provider and payer organizations—think Trinity Health, Tenet, and HCA, as well as Vivity Health, Aetna, and Anthem—will be determined not by the size and structure of new transactions, but by the product advantages and cost advantages that matter to price-sensitive customers. That will be the test of our new

business cycle, the retail revolution.

The right questions to guide your goals

Keeping these things in mind, the more important growth questions health system leaders should ask themselves are: “How do we capture strategic market position, and at what scope and reach?” and “What will make us more efficient and effective at serving current patients, retaining these existing patients for future care needs, and attracting new ones?”

Identifying the means to generate the right size should enter the picture only after you’ve clearly defined your organization’s goals for strategic positioning and consumer acquisition. Remember, you can’t answer “How big is big enough?” until you ask, “Big enough for what?”

When we ask health care leaders about their growth strategy, most turn the question right back on us: “You tell me, how big is big enough?” That’s when the conversation gets interesting.

Our response is always the same: Big enough for what?


Are we large enough to attract purchasers?

One common ambition—and justification for getting bigger—is a desire to be more attractive to employers and insurers seeking comprehensive solutions.

It’s absolutely right to be thinking about how to appeal to these wholesale purchasers. But being larger is not necessarily the magic bullet for getting their attention. Purchasers are more interested in diverse and accessible clinical services for their beneficiaries or employees.

The right questions here are: “What purchasers do we want to attract? Who are the consumers they represent? What is important to those consumers in terms of services and accessibility?”

Meeting these consumer demands may require growth—perhaps by expanding your geographic footprint to cover an employer’s entire workforce, or by bringing together enough patients and capital to support a new specialty service line. But sometimes the right answer for consumers involves divesting and restructuring to maintain lean cost structures and pricing flexibility. And in many cases, the best way to meet the market’s demands is through strategic partnerships where the network expands but the health system, as defined by balance sheet assets, remains the same.

Whether we talk about dollars, beds, square miles, or patients, there are no magic numbers. The right size for your

organization is the size—and shape—that allows you to pursue your strategic aims as competitively and efficiently as possible.

When size impacts corporate structure

A system’s shape is just as important as its size. We find that leaders of expanding health systems often express uncertainty about whether their corporate structure is the right one to support the system’s growth strategy.

Sometimes we’ll hear maxims like “hospital chains should be an operating company, but delivery networks can’t be an operating company.” Just like there are no magic numbers to define size, approaching corporate structure from a this-or-that standpoint is dangerous.

Organizational models succeed when form follows function. That means the model needs to vary based on the corporate entity’s strategy, objectives for making the strategy a success, and capacity to support individuals and business units in reaching the objectives. Moreover, with ever-changing market demands and innovative care and business models, the corporate structure needs to be agile enough to respond to shifting ends.

The better approach to defining corporate structure is to ask, “What are the most efficient and effective ways to support the system’s business units?”

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Regardless of your answers to the diagnostic questions mentioned earlier, it’s worth explicitly revisiting them with your leadership team on a recurring basis. With the pace of change in today’s health care provider market, the answers to “How big is big enough?” and all its subsidiary questions may be different next year than they are today.

A holding company, which places strategic and operational authority at the business unit level. The corporate office has a narrow role, and incentives are aimed at maximizing the performance of the individual business units.

Enterprise standardization, which establishes common operating procedures in lieu of centralized management. Management authority is maintained at the local level, but incentives are in place for meeting system standards as well as individual goals.

Horizontal management, a matrix model that mixes centralized services with shared accountability. This model centralizes transactional functions virtually and maintains a close proximity of staff to frontline operations. There is also increased accountability for enterprise standardization through a single reporting line.

Operating companies, which have a light presence of centralized management at the site level. This structure centralizes staff at one location, maintains strong corporate control over shared services decisions, and off-loads transactional duties from local staff.

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For more on this topic, visit: advisory.com/topics/strategy/health-systems

Here are four different structures expanding systems can consider:


As discerning purchasers challenge hospitals and health systems to prove their value in an increasingly competitive marketplace, integration has risen on many executives’ priority lists. That may be because integration promises strategic nimbleness, or because it can create a more unifi ed and recognizable external brand, or even because it can bring tangible improvements in cost, quality, and patient experience. But whatever their reason for pursuing integration, hospital and health system executives are telling us that acting cohesively and addressing breakdowns in “systemness” are top concerns.

top ‘systemness’ priorities for 2016 and beyond

BY YULAN EGAN AND LISA PERLMUTTER

Providers’

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Drive clinical standardization

Create system-wide physician alignment

Increase IT interoperability

Integrate assets post-M&A

Elevate system-level governance

Consolidatephysicianenterprise

Develop system culture

Pursue M&A

Rightsizethe service

portfolio

Improve system-wide patient navigation

Standardize the patient experience

Create system service line management

Redesign incentives

Improvesupplychain

Create system-wide brand

Centralize back-end functions Rationalize physical footprint

Optimizecapitalallocation

Key Integration Hurdles

Survey reveals four most critical—and challenging—integration goals

Even with this widespread focus on systemness, pursuing integration can mean different things for different organizations.

To better understand which elements of systemness are keeping providers up at night, we surveyed more than 150 of our members. We asked them to rank a list of 18 integration initiatives by level of difficulty and importance to the future success of their organizations.

Four distinct initiatives rose to the top, with more than a quarter of survey respondents selecting those initiatives as one of their top three picks against both vectors.

Percentage Reporting Initiative as Most Challenging and Most Important for Organizational Success*

n=160 C-Suite Executives

Percentage Rating Initiative as Most Challenging

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* Of the initiatives selected as “underway” which of the following are most challenging? Of the initiatives selected as “underway” which of the following are most important to your organization’s success?


Creating system-wide physician alignment

Physician alignment has been a perennial issue for hospitals and health systems, especially eff orts to optimize referral streams. But today’s physician alignment aspirations extend far beyond that: hospitals and health systems view engagement with and leadership from physicians as a crucial linchpin to success on a wide range of cost, quality, and experience initiatives.

When it comes to driving clinical standardization, for example, best-in-class organizations put signifi cant time and energy into building clinical governance structures that empower physicians to lead the charge on creating and deploying care standards. Physician alignment is similarly crucial for many cost-improvement initiatives (e.g., rightsizing service portfolios/rationalizing assets, centralizing purchasing of physician preference items) and patient experience initiatives (e.g., improving care transitions, creating a unifi ed patient experience).

Driving clinical standardization

Reducing clinical variation was the single most popular selection by both measures. This isn’t surprising; in a marketplace where payment is increasingly tied to value rather than volume, providers are looking to improve quality across their entire enterprise.

And as systems double down on margin improvement, they see a signifi cant opportunity to reduce cost through improved and consistent care processes. For systems that have already targeted obvious cost saving opportunities such as reducing staff , controlling supply costs, and centralizing of back-offi ce functions, clinical standardization represents the next frontier of potential cost savings.

Clinical standardization’s high diffi culty rating among survey respondents, meanwhile, is almost certainly linked to the second most widely selected initiative along both vectors: creating system-wide physician alignment.

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Increasing IT interoperability

Much like improvements in physician alignment, the third most common selection—increasing IT interoperability—can signifi cantly aff ect success across a wide range of system goals. In our conversations with provider executives, they often cite breakdowns in communication and the exchange of meaningful information as key barriers to achieving system goals.

Furthermore, IT interoperability is crucial not only for sharing information but also for enabling internal benchmarking and allowing organizations to identify strengths and improvement opportunities.

Integrating assets post-M&A

Finally, survey respondents identifi ed post-merger integration as a pressing and challenging issue. Although for most organizations, this aspect of integration tends to be more sporadic than others, its appearance near the top of the list in both vectors suggests that it’s likely to become a perennial—rather than temporary—priority.

As long as health systems continue to grow through consolidation, the path toward systemness will be an ongoing challenge, and in many cases, hospitals and health systems will need to repeat processes and integration initiatives time and time again.

At times, organizations anticipating future consolidation have used that as a reason to table integration initiatives in the near term. But rather than putting off integration indefi nitely, top performers recognize the need to continually evolve and modify processes and structures to account for growth and integrate new assets into the organization.



to achieving service line ‘systemness’

Being “integrated” can no longer be just an aspirational goal for health care systems—not in light of today’s wave of mergers and acquisitions, narrow payer networks, and new patient access and care coordination standards. Health systems that still operate like a federation of individual hospitals with shared overhead costs risk losing to systems that have taken the steps to align themselves, clinically as well as administratively.

As health care consultants, we get to see what this looks like in the trenches at multiple organizations. I wanted to discuss three of the biggest hurdles to integration and describe how certain health systems are overcoming these hurdles.

BY JOHN JOHNSTON, CPA, MHA

The single biggest barrier to integrating service lines across multiple hospitals is the alignment of medical staffs across facilities.

We are working with a health system on the East Coast with multiple hospitals across a large region. One of the system’s outlying community hospitals does not have a cardiovascular surgery program and generates a large volume of cardiovascular referrals—to a competitor. Although two of the other hospitals in the system have a cardiovascular program, this community hospital’s medical staff does not have established relationships with the health systems’ network of cardiovascular surgeons.

The health system’s leadership team expected referral patterns to shift once it acquired the community hospital, but physician alignment doesn’t happen organically. It often needs to be facilitated. Of course, the referral decision must be made by the physician without influence from the health system.

My colleague, Dennis Weaver, MD, offers some great advice on how to talk to physicians about the benefits of keeping patients in the network. He recently wrote:

Medical staffs aren’t aligned across facilities1

Three barriers

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“Without a doubt, there’s a major economic upside of closing the referral loop. But in order to change habits, physicians must not only feel confident in their network, but should also understand the human impact behind their decisions. In-network referrals allow care management teams to work across an entire care episode, promote easy information exchange around a patient, and hold providers to a common standard of quality. That’s why networks need to engage physicians in the myriad of other benefits that go beyond the financials, and help them understand why loyalty to the network is beneficial for the clinicians, the patients, and the system overall. And if providers across the continuum are aligned in controlling clinical variability, engaged in evidence-based care, and structured for easy patient hand-off—the patients will have a better experience, and won’t need to look for another provider network.”

I’ve heard from several CFOs who are getting pressured by payers to reduce the overall cost—and degree of cost variability—in core service lines. When we’re called in to help improve service line performance, we usually find the root cause of cost variability is inconsistency in care practices across system hospitals.

One physician who practices in two hospitals at one of our Midwestern clients contrasted the two experiences like this: “The way they admit, how the nurses work, my interactions with consulting physicians…all are very different between the two hospitals.”

An important factor in improving consistency is standardizing inpatient care management processes, and we’re working with a large hospital network in the Midwest to do just that. We’re combining their inpatient care management resources system-wide and defining standard roles and responsibilities for care managers, clarifying working relationships between care managers and nursing units and physicians, and using IT to funnel patients into care paths. The new inpatient care management processes are being applied to all hospitals in the network.

We are working with a five-hospital system in the Southeast that recently came together through a merger, and competition for tertiary referrals is a significant barrier to systemization. Before merging, each hospital had its own programs independent of the others, and when we arrived, each leadership team was still being incentivized primarily to maximize their respective hospital’s performance.

I’ve seen this in other health systems—leadership incentives that are misaligned with the system’s integration strategy. For this particular client, we helped the system bring the right stakeholders together to create a system-wide plan for integration.

We homed in on individual programs, and the leadership team defined what the programs should look like across the system, clearly establishing each hospital’s role. From there, health system leadership was able to modify individual incentives based on the mutually agreed upon plan for system integration and performance.

Health system executives are often experts in integrating and consolidating administrative functions, but they frequently overlook these clinical components. Tackling these issues is part of the “next frontier” of system integration.


Care practices are inconsistent2 Leadership incentives and

integration plans are misaligned3


In the early part of this decade, the market was suff ering from a cost, utilization, and value problem. Consumers were using more and more of the product, and yet their real-world outcomes weren’t improving—if anything, they were getting worse.

Providers had no incentive to change, though.

Even though the value of their product was degrading (with consumer costs up but results not following suit), providers’ revenues were consistently rising. Therefore, the structure of the market, and the products off ered to consumers, stayed virtually the same, year after year.

If you think I’m talking about health care, think again. This is the story of the laundry detergent market. But what happened next has direct implications for hospital and health system strategy.

The dirty truth about detergent

In case you aren’t a laundry expert, let me explain a bit further.

People tend to use too much detergent when they wash clothes. Over time, manufacturers have made their detergents more and more concentrated, but that has resulted in even greater overuse.

Clothes washers don’t work as well when people overuse detergent, but manufacturers haven’t had a compelling reason to address the “too much detergent” problem; after all, more detergent used per load translates into more sales.

Innovation agitating the market

In early 2012, market leader Procter & Gamble launched Tide Pods, the fi rst pre-measured liquid laundry detergent product. P&G didn’t do this because it had to—sales of its Tide and Gain detergents were strong and growing, though competitors had been gaining market share. P&G’s motivation was to create a product that was easier to lift for the elderly and less messy for busy parents.

By any measure, introducing Tide Pods was a risky move; P&G jeopardized its own robust sales with a product that virtually ensured that consumers would use less detergent.

Indeed, the overall consumption of laundry detergent fell in 2012 for the fi rst time in many years, as consumers fl ocked to the new, convenient Tide Pods product.

But P&G’s gamble paid off , as the company captured a commanding portion of the new “unit-dose detergent” category, taking

BY THOMAS CASSELS

health system strategy

What Tide Pods tell usabout

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market share from other manufacturers, as well as its existing customer base. The losers in this scenario? The other detergent manufacturers, who stuck to their old approaches and were caught fl at-footed when Tide Pods swept through the

detergent aisle.

Tensions bubbling up for health systems

Based on what we have been seeing around the country lately, the acute care health care market is undergoing a shift similar to what detergent manufacturers experienced.

Certain health systems are investing in the equivalent of Tide Pods—what we call “care transformation” or “value-based care delivery.”

Through care management, by supporting better patient decision making, and by encouraging insurance benefi t design that rewards consumers for making fi nancially responsible choices, these health systems are improving outcomes while reducing utilization and costs.

At least some of these investments in care transformation are making a measurable impact; in many parts of the country, inpatient admissions are signifi cantly below expectations.

If we take a cue from the detergent market, the fi rst-mover health systems will nonetheless end up better off being in the vanguard of industry transformation. The Tide Pods lesson suggests that if there is a major transformation coming, it’s better to be a participant in the transformation rather than just a downstream recipient of the results.

Of course, a sound fi rst-mover innovation strategy requires a plan to accrue business value from transforming the market. Just as P&G realized success with the Tide Pods introduction by shifting market share—as well as raising price—health systems need a mechanism for getting paid for their innovative activities.

Create an intentional, forward-looking strategy

Given how health care purchasing works today, one viable strategy could be to become an insurance company, controlling the entire premium dollar and thereby sharing directly in the benefi ts of improving value. Some of our progressive members have been publicly exploring insurance company capabilities, which would require building new administrative and marketing competencies.

Becoming an insurance company isn’t for everyone though. And from what we’ve seen, not all “fi rst-mover” health systems are aspiring to redefi ne themselves as insurers. Others have been building accountable care organizations, participating in shared-savings models, or pursuing other novel risk-sharing arrangements.

But they are all thinking about their businesses diff erently than they did when their principal business was operating acute care hospitals, and doing it not because they have to, but because they can. These innovators are creating an intentional strategy for the future, rather than waiting for their biggest customers or their biggest competitors to act.

The story of Tide Pods off ers a cautionary tale about the risks of “wait-and-see” choices. Health systems still focused on hospital volumes as a primary metric of success are eff ectively at the mercy of “value-based care” innovators, whose eff orts to transform care delivery have only just begun.



Health care is an industry that seeks answers in familiar places, and we’ve repeatedly seen hospitals and health systems respond to financial pressures and regulatory changes by turning to consolidation. In some respects, this has been a sound and successful strategy: access to both capital markets and favorable contracts often improves with scale.

But other advantages are harder to come by. Few systems have pursued operational efficiencies as aggressively as they might have, and major changes to service and facility portfolios are rarely at the top of integration agendas. In many cases, it seems that the larger a system gets, the less effective it becomes, as conflicting incentives, redundant structures, fragmented information, and a range of other troubles impede concerted effort. In short, too many systems lack “systemness.”

Clinical standardization is especially prone to these pitfalls…

Efforts to improve the quality and consistency of care through clinical standardization—a crucial task in any organization today—are particularly vulnerable to failures of systemness.

It is naive to expect adherence to agreed-upon, evidence-based standards if physicians and hospital leaders operate independently, rely on siloed data, and are never held to account for system-wide performance. What’s more, as a system’s size increases, so does the potential for unwarranted variation in both practice and outcomes.

…but also poised to benefit from the power of scale

On the other hand, systems can bring unique strengths to bear. Systems’ ability to collect and assess large amounts of evidence from

BY BEN UMANSKY

to make systemness an asset in clinical standardization

7 ways

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within their organization enables them to address common concerns about external, “cookbook” standards.

In addition, a successful system that delivers value not only to its patients but also to its physicians and employees can make a stronger case for teamwork and engagement. And of course, systems draw on larger financial, technological, and intellectual resources, which can prove exceptionally valuable in overcoming many operational barriers to effective clinical standardization.

Seven characteristics of systems using scale to their advantage

Our research shows that systems, properly organized, can excel when it comes to generating a true product advantage through predictable, consistent care. Note that the elements of “proper organization” are not structural; in fact, our research revealed that top performers varied widely in core structural features such as size, location, and density.

Rather, we have observed a set of seven common core principles that are foundational to best-in-class systems’ success. These characteristics enable organizations to overcome the unique challenges they face as multi-regional organizations striving to set consistent care standards across large and often dispersed footprints:

1. The system’s top quality champions are the board and CEO—not just clinical leadership. Top performers lead from the very top, with the system CEO and board propelling the organization toward greater standardization.

2. Final authority to approve and endorse care standards is delegated to a system-level entity. A corporate-level structure with cross-system oversight has the broad view necessary to identify variation and prioritize among areas of opportunity.

3. The makeup of care standard working groups is as diverse as the system’s clinical network. Systems are likely to have a range of clinical relationships—groups tasked with developing standards should include representation from across all alignment models.

4. The role of local medical executive committees (MECs) is to provide input and encourage adherence, not to develop care standards. Facility-based MECs should no longer be the sole platform for quality improvement; however, systems must solicit their input along the way.

5. A centralized pool of experts supports implementation in lieu of facility-led quality departments. Centralizing quality improvement (QI) staff at the system level allows the system to deploy assets where and when they’re most needed, extending the reach and efficiency of the system’s staff.

6. Multiple types of incentives are necessary to account for inevitable variability in physician alignment models. Creative use of individual and collective incentives allows systems to encourage adherence to clinical standards within a diverse physician network.

7. Rigorous scorekeeping not only assesses protocol efficacy but also enables organizations to overcome trust barriers. Scorekeeping gives the corporate office the proof of concept necessary to build trust among dispersed leadership teams and frontline staff members.



One of our clients was approached recently by a large local employer that was looking to contract directly for employee health coverage. In the employer’s list of requirements for potential health system partners, patient access stood out as a clear priority. The employer expected health systems to offer:

That’s a daunting list, but not an unusual one. It’s fair to say that “access” is now one of the critical characteristics that purchasers seek from value-based care networks.

Poor access means potential for poor outcomes

I’ve spent most of the last decade building clinically integrated networks (CINs), accountable care organizations (ACOs), and other value-based care programs. Although these now-maturing programs are increasingly fulfilling their purpose of improving the quality, coordination, and cost of health care, I find that many of them struggle with patient access challenges that diminish the integrity and effectiveness of the network.

When patients cannot even get in to see a provider, their inability to receive health care undermines the quality standardization work done in establishing and managing the value-based care program.

value-based care network if patients can’t access it?

What good is a

LAURIE SPRUNG, PHD, MPH

“Same-day primary care appointments for acute conditions; three-day primary care appointments for any condition; 10-day specialist appointments; extended operating hours; extended urgent care hours; and a member website.”

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We interviewed the executive director of patient access at one health system in the Northeast who told us about a recent access shortfall. A patient with mild chest pain tried booking an appointment with his independent cardiologist but was told that it would be a 10-day wait for an appointment. By contrast, the patient, who turned out to have advanced coronary artery disease, got a next-day appointment with a health system-affiliated cardiologist. “That patient got a stent later that day,” the executive director said.

In fairness, missing opportunities to intervene in severe cases is not very common—most providers are well set up to triage emergent situations. But what is common is how negatively patients respond to being denied access—responses that undercut the benefits of the CIN or ACO in other ways. Patients may opt for higher-cost sites like the emergency department, even in non-emergent situations. Or, they may seek care outside of the network, resulting in fragmented or duplicative services.

Moreover, aside from the population health aspects, denying patients timely access to care also denies the health system revenue that could be realized today by better managing leakage.

The health system’s role in setting standards

After investing millions in value-based care programs, health systems can’t afford to let patient access challenges stand in the way of program effectiveness. But how can health system leaders ensure all network providers are adhering to requirements like the ones mentioned earlier?

We’ve found that these are four keys to improving patient access within value-based care programs:

1. Start with the health system’s employed physicians. The owned medical group is a great learning lab for patient access improvement, and positive results

within the medical group can create the momentum and physician champions needed to roll out patient access standards more broadly.

2. Engage physician leaders from the broader network. When beginning to roll out the value-based care program to its provider participants, health system leaders can apply the same approach used when setting up the network originally: engage a core group of physician leaders to create the network’s new patient access standards, like same-day appointments or weekend availability.

3. Develop flexible standards. In most cases, the set of standards in the broader value-based care program will not be as strict as those set for the owned medical group, but they should support the health system’s vision for access. Moreover, the health system should allow participating providers to determine how they will adjust their respective practice operations to meet the standards—the important part being the end result, and not necessarily the path that works for each practice.

4. Consider investing in assistance. Once the access standards are set, the health system can measure the opportunity for improvement and determine how much it is willing to invest to help participating providers meet those standards.

Meeting the patient access demand

The patient access requirements demanded by the employer in my first example aren’t unique to organizations with significant purchasing power. The patient mind-set is changing. And for health systems taking on value-based payment models or operating in a competitive landscape—which, these days, is virtually every institution—improving patient access can mean the difference between organizational success and failure.


Banner Health’s approach to system-wide clinical standardization

20 | Expert Perspectives Winter 2016 20 | Expert Perspectives Spring 2016

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Last September, Banner Health announced six new system-wide clinical standards. They all went live on the same day at all 25 of Banner’s facilities. And now, those standards are part of the “Banner way” of practice. This happens every month at Banner, with its system-level care management structure overseeing the constant creation and implementation of care standards.

The rigor and resources Banner dedicates to clinical standardization efforts is enviable—but it wasn’t always that way. Banner started as a fragmented system post-merger in 1999 with few physician leaders and little cohesion across the medical staff. Now it is a national leader in taking a system approach to reducing care variation.

So how did Banner get there? The system’s physician leaders told us about three strategies that turned the dial on this clinical, and cultural, transformation.

BY MEGAN ZWEIG


Secure physician commitment to care reliability

If you analyzed the mission statements of different health systems, you wouldn’t find too many substantive differences. Every organization dedicates itself to clinical quality, but often this is mostly lip service. Many organizations don’t invest the up-front will and resources to build a system-wide infrastructure that holds all facilities to a consistently high level of quality and safety.

Banner has established a clinical vision of providing reliable, high-quality care system-wide. Employed and independent physicians alike support this vision because it aligns with their values, including:

• Fixing the system, rather than blaming individual physicians for underperformance

• Putting physicians at the forefront of developing system-wide clinical strategy and care standards

• Implementing care standards based on evidence or clinical consensus, with rigorous outcomes monitoring

• Ensuring every patient in the system receives the best possible care

Notice—these efforts all focus on improving the quality of care. Banner does not incorporate cost reduction into its clinical vision, though cost savings is a positive externality from Banner’s standardization efforts.

Build a clinician-centered infrastructure

Too often, systems create clinical guidelines and leave adoption to the local levels—leading to variation in implementation and outcomes. In contrast, Banner has built an extensive “machine” to create and implement a “Banner way” of practice.

Banner has a centralized (but inclusive) clinical leadership infrastructure that decides what standards clinicians should follow. And the system provides wraparound supports such as process engineers, data monitoring, and clinical workflow tools to ensure every frontline clinician can easily adopt those standards.

“It’s not just asking the physicians to come together to create something and hope that it gets cascaded through the system. It’s really a structure, and it’s very well-resourced.”

Dr. Michael O’Connor, Chief Medical Officer Banner Casa Grande Medical Center

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For instance, Banner brought in an out-of-industry engineer with a background in helicopter manufacturing to walk its obstetricians and nurses through a rigorous process to outline every component of the labor and delivery process, from when a mom arrives at labor and delivery to when the baby and mom go home. The session enabled Banner providers to identify “failure locations” and how the system could address those from an engineering perspective.


Integrate independent physicians into organizational culture

What’s perhaps most impressive about the Banner story is that, with an 85% independent medical staff, the system has created a culture in which all physicians participate in efforts to reduce care variation.

Banner encourages independent physicians to participate in Clinical Consensus Groups—and gives them the authority and support to truly transform clinical practice. Even though independent physicians are paid a per diem rate to participate, less than a third end up submitting their time sheets for compensation.

Of course, some physicians will be resistant to change. In those cases, Banner has embedded clear adherence expectations into ongoing professional practice evaluation (OPPE) and peer review, and will have escalating performance conversations with outlier physicians.

“It’s not just asking the physicians to come together and create something and hope that it gets cascaded through the system. It’s really a structure, and it’s very well-resourced.”

Dr. Michael O’Connor, Chief Medical Officer Banner Casa Grande Medical Center

24 | Expert Perspectives Spring 2016

Sanford Health’s journey toward

clinical standardization

Q&A

Sanford Health’s journey toward

clinical standardization

Sanford Health, an integrated health system headquartered in South Dakota, comprises 43 hospitals and approximately 250 clinics located throughout nine states. The system has aggressively reduced operating budgets over the last few years, and identified utilization and care variation as areas of priority.

Sanford hired Advisory Board Consulting and Management to identify its top opportunities for improvement and build a road map to reduce cost per case in its four largest regional referral centers. The organization decided to seek this outside help after previous attempts to implement “DRG teams” in high-volume DRGs failed to make a material impact on cost.

Nate White, Sanford Health’s chief operating officer, Randy Bury, Sanford’s chief administrative officer, and John Johnston, senior vice president and leader of the Hospital Performance Initiative practice within the Advisory Board’s Consulting and Management division, recently sat down with the team from At the Helm, our blog that provides insights for the health system C-suite. They discussed the factors most critical to standardizing care, and the role the Advisory Board is playing as a partner in the process.

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Q: How did Sanford Health arrive at the decision to take a system-wide approach to clinical standardization?

Nate White: We have always viewed standardization as the “holy grail.” We know that if you can standardize best practices, you can create better quality, outcomes, and patient experience, and also reduce cost. Variation is the killer in any industry, especially health care.

Q: What are the critical success factors Sanford has put into motion to achieve clinical standardization?

John Johnston: Clinical standardization isn’t just about the hospital—it’s about the entire network of care. We’ve been working together with Sanford for some time and are starting to see measurable results and action plans getting checked off the list.

Nate: We knew intuitively that to operate as a system we needed first to have clinicians on the same page. We also believed that this went beyond compensation models. So we began by creating a system-level “council of governors” to oversee clinical governance functions at the system level. All 1,500 of our physicians roll up into this structure. The council is led by physicians, and the decisions are made by physicians.

We also established an enterprise-wide Quality Cabinet made up of system chief medical officers and related clinical leadership to establish standards, benchmarks, and patient experience

metrics for the entire enterprise. The first thing the Quality Cabinet tackled was physician leadership and medical staff structure at the local level. To assist with standardization, we combined the clinic and medical staff functions also at the local level.

Another high-impact initiative for Sanford has been improving performance transparency for our physicians. Our online physician portal is where physicians can see all their day-to-day information, compensation, schedule, etc. We also included transparency in quality data, which means all of the physicians can see everyone else’s data. We’ve invested hundreds of millions of dollars to have the same Epic build through all of our sites. We are now able to view data in the same way. On the physician side, that’s a great way to start to move the needle.

One final piece we realized we were missing at the enterprise level was a body of nursing leadership. So we created a third council with chief nursing executives from every major market in the enterprise, with representation from quality, data analytics, and the system chief clinical officer.

Randy Bury: It’s so easy on paper to design a structure on organizational charts. What really makes it work is the relationship between people across the enterprise. You need people meeting with each other to get a sense of unity, a sense of being part of the same organization.

Over time, you get the leaders across the system saying “that’s my colleague who has a name and a face” and you start to break down barriers. This is especially important in a multi-state system like Sanford.

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Q: What role is Advisory Board Consulting and Management playing to help you get there?

Nate: When you bring a consultant like Advisory Board Consulting and Management—sometimes people have a feeling of “you don’t know any more than us.” With our engagement, we have received valuable data from other hospitals and benchmarks. You’ve really become—especially when it’s one market judging the other—that independent perspective that uses its resources to help identify our best practices.

Randy: What you learn is that you can find best practice internally almost every time. We have to learn from each other, adopt each other’s best practices, and operate as a system.

John: We’ve done a lot of analysis to help you get there. We evaluated 12 months of recent patient records and identified opportunities to reduce variation, increase use of care paths, reduce avoidable length of stay, and improve complication and readmission rates. These findings were grouped to help you organize system-wide initiatives by your core service lines.

And what we found is that potential cost savings attached to these initiatives exceeds 20% of direct costs per case in those service lines. You’ve now deployed teams at each of the four regional hospitals who are implementing the road maps in parallel, enabling Sanford to establish system-wide

standards that will be implemented across all hospitals in the system.

I know that sometimes there is reluctance to ask for outside help. But once we got past that barrier, I think your teams have embraced the fact that we bring an organized approach to move the needle, and we have experienced clinicians who have the ability to identify and address root issues, while still keeping your clinical staff at the center of the process and making the decisions about how to standardize the care.

We expect that all of this will enable you to achieve approximately 15% to 20% reduction in direct cost per case and hardwire sustainability through system-wide care paths and consistent clinical processes.

Nate: It always helps an organization galvanize staff to work hard to change when your team has a poor financial year. However, these past few years have been some of the best financial years in our organization, so it can be tough to have teams self-identify areas of opportunity. Your project kept us focused on our areas of weakness during the good times so we can continue to improve and look at ways to get better.



Four takeaways from

Intermountain on transforming the supply chain

Recently, The Advisory Board Company’s Spend Performance Solutions teamed up with Intermountain Healthcare and invited more than 25 supply chain leaders from across the country to travel to Salt Lake City, Utah, to get a look “under the hood” of Intermountain’s high-performing Supply Chain Organization (SCO).

Since its formation 10 years ago, Intermountain’s SCO has delivered more than $500 million in savings for the health system, which includes 22 hospitals in Utah and Idaho. This impressive feat earned Intermountain four national supply chain awards. As a result, we were excited to learn how they focus on creating value beyond price, refining stakeholder engagement, and effectively using technology and analytics.

Joe Walsh, Intermountain’s vice president of supply chain and CPO, and his team spoke to us about transforming the supply chain function to achieve its full potential. Based on their results, they believe supply chain can be a strategic asset for helping health care organizations thrive in a value-based economy.

Our day-long discussion revealed four critical insights for organizations looking to follow Intermountain’s path toward supply chain transformation and innovation.

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BY ELIZABETH “BIZZY” GOODMAN-BACON


Pursue value across the full contract lifecycle

At Intermountain, Joe and his team believe that 75% of the value that can be extracted by supply chain comes after the contract negotiation. With a signed contract, the job of “category management” across the entire lifecycle of the agreement has just begun.

Our challenge as supply chain experts is to ensure every supply chain interaction with stakeholders and suppliers focuses on how to extract value during at every stage, not just at the time of contracting.

What makes capturing value after the negotiation so difficult is getting clear visibility into the hospital’s “version of the truth.” It’s discouraging not to reap the full rewards of a well-negotiated contract. Yet, this happens when organizations lack the data or the ability to track performance against commitments, changes in product utilization, and supplier performance.

In our experience, having the data you need to get all the savings you have earned hinges on effectively leveraging technology across each of the stages above.

Be assertive about supply chain impact and make some bets

One of the best stories we heard from Intermountain’s team was how supply

chain managers sought out the C-suite and presented a vision of the margin impact they knew they could achieve.

After years of working toward cost reduction, Intermountain could have assumed there wasn’t much left to squeeze, but the basic math proved powerful. The lesson for other organizations: taking a bet on prioritizing supply chain improvement to reduce costs makes sense.

Joe’s team said, “…to increase profitability by $25 million, we can either reduce costs by 5% or increase revenue 100%.”

Intermountain’s Cost Reduction Projections

Sample Pro Forma

Believing that cutting costs was far more viable than the amount of work needed on the revenue side to achieve the same margin impact, the Intermountain supply chain team approached the C-suite and said, “If you give us X resources, we will commit to returning $X amount of value to the organization.”

Build a compelling case internally about why your health system should invest in supply chain and stick your neck out there. The rewards can be great.

Elevate the rest of the organization

Most supply chain organizations would say they define savings goals, facilitate

Total Lifecycle Management by Category

Grow the Value Supplier Management

Find the Value Contract Management

Document the Value Contract Management

Capture the Value Supply Program Management

Negotiate the Value Strategic Sourcing

Revenue Cost Profit

Current Situation

$500M $475M 95%

$25M 5%

Cost Management

Initiative

$500M $450M 90%

$50M 10%

Reimbursement or Revenue

Initiative

$1B $950M 95%

$50M 5%

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the selection process, and quarterback the contract process. Joe and his team challenged visiting supply chain leaders to also become “strategic enablers” who help their organizations achieve overarching goals.

Supply chain is not just on the hook for making decisions to hit a savings goal. The bigger responsibility is to help the entire organization ensure that each department has access to what it needs to:

• Ensure the best quality care

• Drive the best outcomes

• Get the best financial terms for the products and services that meet those requirements

A key component to delivering on this organization-wide directive is the partnership that the SCO nurtures with clinical and non-clinical teams across Intermountain. As the lead facilitator, the supply chain team works with departments across the organization and with suppliers to:

• Move the focus from price to solutions, in order to lead to mission-based decisions

• Identify opportunities to reduce cost and build trust

• Develop solutions that lead to higher quality and lower cost care

Look everywhere for top-notch talent

In the last five years, every single executive leader hired into Intermountain’s supply chain organization has come from outside health care. Additionally, 40% of the leaders in attendance at our supply chain summit originally hailed from industries other than health care.

This interest in out-of-industry expertise is noteworthy. Health care supply chain is unique, but not necessarily in a good way. Incorporating knowledge from industries with more evolved supply chains is a

powerful strategy as we deal with health care supply chain challenges.

Joe called attention to several specific concerns when comparing health care supply chain to other industries:

• Logistics in health care are more than 10 times the cost of those in the retail industry

• The most expensive and high-risk items often have the least control (e.g., implant inventory managed by supplier sales reps)

• Health care outsources less than most other industries

• Health care has the lowest level of trust between buyers and suppliers (of any industry surveyed)

As our industry continues to evolve toward value-based care, it is essential that supply chains transform to provide the infrastructure needed for success in this new environment. Fortifying your team with supply chain experts from both inside and outside the health care industry makes good sense.



To submit questions or comments to our team, please email [email protected].

For additional hard copies of this publication, please email [email protected].

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The Advisory Board Company has made efforts to verify the accuracy of the information it provides to members. This report relies on data obtained from many sources, however, and The Advisory Board Company cannot guarantee the accuracy of the information provided or any analysis based thereon. In addition, The Advisory Board Company is not in the business of giving legal, medical, accounting, or other professional advice, and its reports should not be construed as professional advice. In particular, members should not rely on any legal commentary in this report as a basis for action, or assume that any tactics described herein would be permitted by applicable law or appropriate for a given member’s situation. Members are advised to consult with appropriate professionals concerning legal, medical, tax, or accounting issues, before implementing any of these tactics. Neither The Advisory Board Company nor its officers, directors, trustees, employees, and agents shall be liable for any claims, liabilities, or expenses relating to (a) any errors or omissions in this report, whether caused by The Advisory Board Company or any of its employees or agents, or sources or other third parties, (b) any recommendation or graded ranking by The Advisory Board Company, or (c) failure of member and its employees and agents to abide by the terms set forth herein.

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spring 2016 | volume 9

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