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A team of researchers from the University of Washington has been analyzing seven value-based payment programs with an eye toward how the payment landscape may evolve. They’ve published an article on their findings as well as an overview at Health Affairs (link below), which provides a sampling of how some initiatives are playing out.

An analysis of pilot programs implemented in six states (Maine, Massachusetts, New Hampshire, Oregon, Pennsylvania and Washington) found a mixed bag of successes and failures in terms of “payment reform.” Their report attempts to address reasons for varying success and failure rates. Among those factors that seem to facilitate a movement toward value-based models are:

>> Strong, trusted leadership that effectively knows how to balance competing interests between providers and payers.

>> Well-organized payers, particularly at the state level, which are able to sustain market pressures on providers.

>> Access to databases such as an all-payer claims database (APCD) as well-functioning health information exchanges (HIEs) to enable sharing of data.

Factors that appear to facilitate the maintenance of fee-for-service (FFS) payment structures include the following:

>> Lack of ongoing engagement by major purchasers, such as self-insured employers, union groups and consumer groups.

>> Inability to implement a standardized claims adjudication process, which would otherwise enable accurate comparisons across different treatment plans.

>> Competing priorities among different stakeholders, even within a single insurer, for example, when an insurer’s nationwide priorities conflict with those at the state and local regions.

Other factors influencing these dynamics include the costs involved in changing FFS billing processes and payment transactions; healthcare delivery systems that are unable to assume responsibilities for population health (both financially and clinically); and a lack of interest from patients as well as groups that represent patients. You can learn more at the link below.

Heath Affairs: http://healthaffairs.org/blog/2015/04/14/implementing-value-based-payment-reform-learning-from-the-field-of-practice/
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Interviews recently conducted by Becker’s Hospital Review highlight the advice that CEOs wish they’d received prior to starting their job.

Chris Van Gorder, President and CEO of Scripps Health in San Diego remarked, “Nobody ever told me that being CEO really was a 24/7 job, 365 days of the year, with little privacy in an environment where every decision is scrutinized.” Steven Goldstein, CEO of Strong Memorial Hospital in Rochester, NY, said, “The constant need for problem solving is an inherent part of the business.”

One common thread in many comments is that there is a lot of on-the-job learning that takes place in the C-suite. Michael J. Dowling, president and CEO of North Shore-LIJ Health System in Great Neck, NY, stated, “First of all, nobody told me much of anything before I became CEO in 2002.”

Career development is all about taking responsibility for the future and being proactive in terms of where you’d like to be in the coming years. Taking the initiative to learn from others will prepare you to be better able to take advantage of opportunities when they arise.

Another key takeaway: future developments in the healthcare industry are relatively unpredictable. Mr. Downing summed up his sentiments, saying, “We all knew healthcare was changing as we entered the new millennium, but nobody understood the degree to which healthcare would evolve.” But, on a positive note, he indicated that navigating new complexities in the industry has been one of the most rewarding challenges of his career.

When Mr. Van Gorder, began his job as CEO, the hospital was already in default on its bonds and he agonized over having to initiate layoffs and let many people go who he had worked side-by-side with over the years. However, over the past 15 years as CEO, he has been able to sustain a “no layoff philosophy” even though it has been sometimes difficult to find ways to reduce costs.

To learn more, you can read their advice and comments in the article at Becker’s Hospital Review: http://www.beckershospitalreview.com/hospital-management-administration/the-advice-nobody-gave-me-before-i-became-a-ceo-3-chiefs-weigh-in.html
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Technology is transforming the healthcare industry at an accelerating pace, and the annual HIMSS conference is one of the best venues to learn about current trends and future outlooks. HIMSS is a not-for-profit organization dedicated to health IT education and networking opportunities.

Next week’s conference runs from April 12-16 in Chicago, and highlights at the show include new areas of focus on cybersecurity, building value in health IT, and using innovative non-EHR technologies to improve care delivery, clinical workflow, collaboration and patient satisfaction.

Keynote speakers include George W. Bush, who helped drive the development of health IT by establishing the Office of the National Coordinator (ONC) for Health IT when he was president. Karen DeSalvo, the current National Coordinator for Health IT is also a keynote speaker, along with Medicare & Medicaid Services Acting Administrator Andy Slavitt. Other featured speakers include Humana CEO Bruce Broussard and Walgreens President Alex Gourlay.

An important topic at every year’s HIMSS conference is technology interoperability—the ability to combine and integrate systems from various vendors to achieve the greatest possible value from IT resources. In part, the ONC is dedicated to helping address these issues, but the pace is slow. In January, the ONC published its 10-year plan to help foster interoperability (link below), but much remains to be done to transform the plan into reality.

When this year’s HIMSS conference kicks off on Sunday, the first topic for discussion will be interoperability, with a presentation by Erica Galvez, the ONC’s Interoperability Portfolio Manager, who will discuss how the government is planning to work with industry to improve interoperability. Visit the resources below to learn more about the conference and the ONC roadmap.

HIMSS Conference: http://www.himssconference.org/

ONC Technology Roadmap: http://www.healthit.gov/sites/default/files/nationwide-interoperability-roadmap-draft-version-1.0.pdf
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As healthcare payments are increasingly linked to value-based models, population health management is becoming more important as a means to reduce financial risks. A report recently released by the Academy Huron Institute provides some valuable background on the evolving trends within population health management. Three key factors noted in the report include the following:

Increasing prevalence of risk-based programs—the report provides an analysis of how healthcare providers are taking on greater risks through commercial incentives, partnering with health plans, and participating in accountable care organizations (ACOs).

Greater emphasis on population health management—health systems are planning to allocate a “significantly greater level of investment” in population health management, with ROIs anticipated within three years to four years.

The need to utilize new infrastructure—the infrastructure needed to improve population health management is mainly tied to data analytics and related information technology systems such as electronic health records. The key to maximizing ROI here involves the ability to collect large amounts of this data and then transform it into actionable intelligence through the use of data analytics.

The report notes that 2015 may be a pivotal year marked by a “dramatic shift toward the use of risk-based agreements and execution of population health management.” In 2014, approximately 15% the revenue generated by the nation’s leading health systems was earned through value-based or at-risk alternative payment models, but that percentage is expected to increase to 21% this year and then grow substantially throughout the remainder of the decade.

You can learn more by downloading the 10-page report at: http://www.huronconsultinggroup.com/Insights/Report/Healthcare/Population-Health-Collaboratives-2015-Agenda-Based-on-Evolving-Trends
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A recent survey of over 1,700 executive managers, including the C-suite but excluding CEOs, found an extensive relationship between the CEO’s reputation and that of the company itself. Of the executives surveyed, 87% said that a positive reputation for the CEO was important in attracting investors, 83% said it was important in garnering positive media attention, and 77% said it was key to attracting employees.

The survey was conducted by KRC Research in partnership with the PR firm Weber Shandwick. KRC performs quantitative and qualitative research, and this survey included an analysis of responses gathered across companies with annual revenues of at least $500 million.

Survey respondents indicated that they attributed 45% of the company’s reputation to be based on the CEO. Fifty percent of the respondents said this link between the CEO’s reputation and that of the company will increase in the coming years. Other data collected include the following:

>> 58% of senior management said the CEOs reputation was responsible for keeping them at the company.

>> 50% of executives indicated the reputation of the CEO impacted their decision to accept a position with the company.

>> 44% said that senior management personnel (other than the CEO) had a great deal of influence on the company’s reputation.

Respondents noted that “it is important for CEOs to partake in external relationship-building and shine spotlights on their companies.” When asked which activities are most important in this regard, 76% indicated speaking at industry or trade conferences, 71% said it was important to be accessible to the news media, and 68% indicated the importance of being visible on the company’s website.

You can learn more by downloading the full 20-page report at: http://www.webershandwick.com/uploads/news/files/ceo-reputation-premium-executive-summary.pdf
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Last week CMS announced a new Next Generation ACO Model, which asks providers to agree to take on greater risks related to their performance in return for potentially sharing in a greater proportion of savings. In return for accepting more risk, CMS is providing a “predictable benchmark and flexible payment options that support ACO investments in care improvement infrastructure.”

A key aspect of the new model involves a greater level of care coordination between providers and beneficiaries. CMS is offering additional coverages for tele-health services as well as post-discharge home services, and beneficiaries will be financially rewarded for receiving their healthcare from the ACO’s staff; however, participating beneficiaries will retain the freedom to engage any Medicare provider.

The new model features two “risk tracks,” one of which is a 100% “Full Performance Risk” while the other involves more shared risks. The stated overarching goal of the ACO approach involves “paying providers based on the quality rather than the quantity of care they give patients;” and with increased financial incentives for providers, CMS believes the approach has the potential to simultaneously decrease costs while improving health outcomes.

Interested organizations will have two opportunities to apply, one this year and one next year, and participation in the new ACO model is expected to last up to five years. Providers are required to submit a Letter of Intent by May 1, followed up with a formal application by June 1, 2015. The second round of applications will be accepted next spring, 2016. For more information, see the links below.

HHS Press Release: http://www.hhs.gov/news/press/2015pres/03/20150310b.html

CMS Next Generation ACO Model: http://innovation.cms.gov/initiatives/Next-Generation-ACO-Model/

Frequently Asked Questions: http://innovation.cms.gov/Files/x/nextgenacofaq.pdf
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A web-based search tool provided Billian’s Health Data provides access to a large database of hospital news, including mergers and acquisitions, renovation plans, facility openings, health technology rollouts, RFPs, c-suite hires and more.

An easy registration process (just name and e-mail address) allows you to search by region of the country or state, and then select a category such as:

● Mergers/Acquisitions
● Construction/Renovation
● Facility Openings
● Facility Closings
● Requests for Proposals (RFPs)
● Certificate of Need (COA) Announcements
● Health Information Technology
● Medical Equipment

“DBA Announcements” are also searchable, which includes hospital transitions in ownership, partnerships, name changes, rebranding, and new designations such as those involving hospitals that have changed trauma center certifications.

The information can be sorted by Date, Region or State, and all of the data is searchable by specific facilities as well as by free-form keywords, which allows easy filtering.

Billian’s is a market-research firm that sells industry information to vendors and providers, but it also provides free access to this database, which can help executives learn more about facilities of interest, including recent investments, divestitures, executive moves, etc. You can learn more by accessing the database at the link below.

Billian’s Hospital News and Vital Statistics Search: http://www.billianshealthdata.com/News/Vitals/Search
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A recent analysis of popular hospital rating systems revealed wide discrepancies. The research results were published this week by Health Affairs Journal and focused on four popular rating systems: U.S. News & World Report, Consumer Reports, Leapfrog, and HealthGrades. The study found that the rankings can confuse not only patients but providers and payors as well.

Some of the issues involve lack of consistency on how quality is measured and a lack of transparency in how the ratings are conducted. A key takeaway is that hospitals could use the data to help focus on improvements but are unable to do so until standardization and transparency issues are addressed.

While Consumer Reports and Leapfrog do provide “full methodological transparency” they fall short by using “judgment-based weighting schemes as opposed to approaches that incorporate information about measure reliability and validity.” Likewise, “U.S. News and HealthGrades do not make their proprietary risk-adjustment models fully transparent.”

Key findings in the study reveal that no single hospital was rated as a “high performer” by all four of the ranking systems. Additionally, only 10 percent of the 844 hospitals that were rated as a high performer in one system were also rated as a high performer in any of the other three systems.

Access to the full report is limited to subscribers of Health Affairs Journal but news articles on the report are available at the links below.

Fierce Healthcare: http://www.fiercehealthcare.com/story/best-and-worst-hospital-rankings-often-conflict-confuse-consumers/2015-03-03

New York Times: http://www.nytimes.com/2015/03/03/business/hospital-rating-systems-differ-on-best-and-worst-facilities.html?_r=0

Heath Affairs Journal: http://content.healthaffairs.org/content/34/3/423.full.html
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A committee report to Georgia governor Nathan Deal was published this week (link below) and it proposes a plan to revitalize rural hospitals by making them part of a “holistic system” via an integrated “hub and spoke” model.

This plan to help rural hospitals in Georgia provides a reference point for other states and small hospitals in similar situations. Almost two-thirds of the 61 rural hospitals in Georgia are losing money, and almost one-third have been operating with a budget deficit for at least the previous five years. Only seven of the hospitals have been profitable in each of the previous five years.

In the committee report, four hospitals have been proposed as the “Hub” systems that will provide primary hospital care as well as nursing home, home health and rural health clinic components. The “Spokes” will include the following:

● Smaller Critical Access Hospitals
● Federally Qualified Health Centers (FQHCs)
● School Clinics Equipped for Telemedicine
● Public Health Departments

“Spoke” resources also include local physicians as well as ambulances equipped with Wi-Fi and telemedicine capabilities. In this model, the larger regional hospitals would direct patients to facilities that provide the most appropriate specialized services. As a result, smaller facilities will not be burdened with the costs associated with providing a wide range of specialized services. Additionally, a key goal is to minimize use of Emergency Departments as an access point for primary care.

The committee’s recommended pilot project designates four Hub facilities: Union General, Appling Health System, Crisp Regional and Emanuel Regional Medical Center. The State of Georgia is providing $3 million in funding for the pilot project and associated infrastructure.

To learn more about the initiative you can access the final published report and a related news article at the links below.

Rural Hospital Stabilization Committee – Final Report to the Governor: https://gov.georgia.gov/sites/gov.georgia.gov/files/related_files/document/Rural%20Hospital%20Stabilization%20Committee%20Report%20022315%20FINAL.pdf

Atlanta Journal-Constitution Article:
http://politics.blog.ajc.com/2015/02/23/nathan-deals-plan-to-save-struggling-rural-hospitals/
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This is the fourth in the series that explores the inner working relationship between a hospital foundation and its parent during a sale. The author, John Gilchrist, FAHP, CFRE, has lived through one nonprofit sale and is experiencing a second sale. His insights into this process can prove to be excellent counsel to an organization going through a merger or acquisition.

Nothing in this post should be taken or construed as professional advice nor is it intended as such. For your particular situation, you should always seek the advice of a competent professional attorney. I simply seek to share my insights and experiences as this is my second nonprofit sale in the capacity of a Foundation executive in the past seven years.

In general, when one non-profit acquires another, the Foundation being acquired has a corporate member substitution, changes it fundraising focus to the new member, and continues to raise funds and friends, albeit for a different mission. The acquiring organization must work through the important work of integrating two corporate and philanthropic cultures, adapting and combining databases and records, and determining future staffing, for example.

In the event of a for-profit acquisition, the Foundation may be re-purposed, dissolved with any remaining assets going to another foundation with a similar mission, or a conversion foundation may arise. A conversion foundation is typically used to create the strongest degree of separation from the former non-profit enterprise. The conversion foundation is created with the excess of sale proceeds, after the former non-profit’s liabilities and debts have been discharged.

The conversion foundation may be saddled with pension liabilities or other debt, as was the case with the Empire Health Foundation (Spokane, Washington), which arose from the sale of non-profit Empire Health Services to Community Health Systems. In that transaction, pension and workers’ compensation liabilities of approximately $35-40 million were transferred to the Empire Health Foundation (EHF). The move enabled the new for-profit owner to start with a clean slate and may be a requirement of the Asset Purchase Agreement (APA). While the EHF had the extensive level of liabilities, it also had the assets to cover them. And it possessed an unrestricted corpus of approximately $50 million.

The former Foundation is usually dissolved, with remaining assets going to the conversion foundation. In most cases, the former Foundation will have disbursed all its available funds, both unrestricted and temporarily restricted funds prior to the close of the sale. If any temporarily restricted funds remain, state law governs the final dispensation. For example, should the donor be deceased, those funds might revert to the attorney general’s to attain the closest attainment of the restriction – perhaps with the conversion foundation or a community foundation. If the donor is living and does not elect to re-restrict his/her gift, said gift may be returned.

The board of the former Foundation is normally disbanded; though some members may be asked to join the conversion foundation’s new board. The structure of the conversion foundation is much different than your former Foundation. The primary difference is the conversion foundation is likely to be formed as a private foundation, with limited or no fundraising responsibilities. Instead of a major gifts officer, planned giving officer, annual giving officer, the staff complement may likely be program officers, grant management, and a chief investment officer, for example. The conversion foundation may hold an opportunity for the former Foundation executive to remain affiliated with a semblance of the former enterprise. Do not discount or disregard the potential employment opportunity here, but it may not be the right fit for every Foundation executive.

In the next installment, I will discuss questions around fundraising activities post-sale announcement…and as always, your feedback, questions and comments are welcomed.
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A focus group involving eight CMOs was held last week in Miami by Navigant, a healthcare research organization. Navigant partnered with the American Association for Physician Leadership to interview the CMOs about how their role is changing within different venues: hospitals, medical groups, health insurers, and post-acute facilities.

Within the C-suite, CMOs see their roles expanding significantly. Conclusions drawn from the focus group include four key themes that are putting increased pressure on the role of CMOs:

Clinical transformation: Particularly in hospitals and medical groups, CMOs must work as an integral part of a team that is focused on reducing errors, increasing compliance with evidence-based medicine, reducing unnecessary care, and encouraging patients to take a more active role in their healthcare.

Physician engagement: While “rank and file physicians believe they should be left alone,” CMOs are increasingly required to engage doctors in areas such as team-based care, clinical integration, and clinical performance.

Provider-sponsored risk: With financial risks increasingly being shifted to providers, clinical decisions must be approached in a collaborative manner within “care teams” and with patients in order to reduce costs.

Super systems: CMOs must quickly adapt to the new environment where large health systems offer comprehensive services, health plans and even alternative health services.

To learn more about these trends and how they are impacting hospitals and other healthcare organizations, visit: http://www.naviganthrp.com/cmos-mvps/
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This is the third in the series that explores the inner working relationship between a hospital foundation and its parent during a sale. The author, John Gilchrist, FAHP, CFRE, has lived through one nonprofit sale and is experiencing a second sale. His insights into this process can prove to be excellent counsel to an organization going through a merger or acquisition.

With the January 13 announcement, I took advantage of using the year end summary of giving to present the facts around the sale. As usual, every donor, regardless of amount, in the prior year received his/her summary of giving, along with the general stewardship report. In addition, a 2-page Frequently Asked Questions (FAQ) supplement was provided. If you would like a copy, please e-mail me at This email address is being protected from spambots. You need JavaScript enabled to view it. .

Patience is needed in preparation of these materials – the corporate communications team must approve any external communications after the announcement. One lesson for the reader to take: Use the January 31 deadline the Foundation normally notifies each donor who has made a gift of single gift $250 the breakdown of charitable gifts vs. the Fair Market Value (FMV) Foundation provided goods and services, i.e. how much of the event ticket is eligible for a federal charitable tax deduction, and use it as a prime communications vehicle.

I salute our corporate communications professionals for their assistance in preparation of the FAQ with the many pressures tugging at their schedules. Another lesson: the Foundation executive must lead in the process, but cannot do it alone.

With the communication priorities of employee, physician, and bondholder relations (and creditor committee in a bankruptcy filing) looming in a nonprofit hospital sale, every public communication must be vetted through the filter of the system’s public relations team, or in the case of a single hospital sale through its public relations.

Compiling the FAQ was no simple task, as the system could not provide any indication as to type of buyer: non-profit, for-profit, or governmental.

In the next installment, I will discuss what happens in a for-profit acquisition of a non-profit enterprise…and as always, your feedback, questions, and comments are welcomed.
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This is the second in a series that explores the inner working relationship between a hospital foundation and its parent during a sale. The author, John Gilchrist, FAHP, CFRE, has lived through one nonprofit sale and is experiencing a second sale. His insights into this process can prove to be excellent counsel to an organization going through a merger or acquisition.

The system had prepared the announcement communications (i.e. media releases, notices to physicians, associates, volunteer leaders – including those on the Foundation board) for a 10 a.m. distribution. My role was to call the board members of the Saint Louise Foundation with the news; as the O’Connor Foundation board met at noon on announcement day, I would contact those who were not in attendance. With each call, the deeper the news impacted me – my world had just been fundamentally shifted. During each call, the Foundation board member wanted to know how and when the decision was made. Why did the system only announce its intent to sell and not wait until a buyer had signed an agreement? That actually turned into a positive as it allowed me to discuss the values of the sponsoring order and the importance they placed on respect and transparency, to name but two. Several times I was asked what impact this would have on me personally, as I had started only five months ago and had not yet moved my family. I appreciated and thanked those persons for the concern for my personal welfare; I politely answered that matter would resolve itself over time. Our primary tasks are to disseminate information about the sale to our donors and other stakeholders and to find avenues for continued fundraising, if possible.

Frankly, I received some pushback on future fundraising. Some board members felt it best to cease the existing events already in the pipeline. Always listen to their concerns – they do set strategy and have deep connections into the community. Some felt they would not be as successful as in the past – and they made a valid point. Fortunately, the board chair, who in his profession provided advice and counsel on many mergers and acquisitions, joined me and advised everyone to take a pause, not make any hasty decisions, and to focus on where the enterprise was positively engaged in outreach activities the Foundation could support.

Every development officer has that list of activities ready to describe to a prospect – make sure you have your list ready and updated. Fortunately, our Foundation had supported a pediatric clinic that traditionally saw patients with no resources, were undocumented, or for any number of reasons, had no medical home.
While most board members could understand the economics and the rationale for the sale, the understanding did not mitigate the emotional effects brought on by the announcement. In some ways, board members took it almost as the announcement that a loved one just received a terminal diagnosis. The Daughters of Charity had served San Jose for 125 years. Some of these volunteers had served this faith-based mission of the hospital for over 10 years – I observed some of these board members viewed the Sisters v almost as family members. They were understandably concerned, perhaps even worried, for their future. The Sisters responded with the dignity, class, and grace they had shown every member of the San Jose community. They relied on God for their daily sustenance, and were not about to change their thinking with one announcement!

Their attitude of acceptance of the decision to sell, prayerful discernment for a new owner who would share their passion for service to the less fortunate, and commitment to all associates was evident throughout this initial board meeting. Our CEO excelled in casting the perspective toward the future. Our situation was unfortunate, yet he painted the picture of the San Jose hospitals’ work toward sustainability that had been accomplished to date – a new owner could provide significant resources the Daughters just did not have.

One lesson for the Foundation executive is to always present the positives for the organization: a new owner saves the enterprise, preserves thousands of jobs, recapitalizes the facility, brings economies of scale for purchasing, etc. As the Foundation executive, you cannot show any negative feelings or impressions about your professional future. Take the high road, always. I found 40-50 minutes on an elliptical rider at the gym every day, or every other day, would literally “work the negatives out”. So you have another reason to exercise.

In the next installment, I will discuss the donor communication and the possible futures for the Foundation…and as always, your feedback, questions, and comments are welcomed.
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The increase in hospital merger and acquisition (M&A) activity creates many consequences, both known and unknown. Generating greater economies of scale for purchasing, payor contracting, and physician recruitment are just a few of the known ramifications. One large unknown is what happens to a hospital’s fundraising foundation. With over 4,500 US nonprofit hospitals and many of those with a fundraising function, both the acquiring and acquired organizations need to understand these consequences, beyond the legal transactional considerations.

The foundation of the acquired hospital may have hundreds, perhaps thousands, of loyal and dedicated donors. The combined gifts of these friends of the organization may range in the seven to nine figures. Many of these foundations have built deep, meaningful and productive relationships with community members. What happens to these relationships in a M&A situation? Perhaps the foundation’s fund corpus is not significant relative to the dollar value of the combined organization. A 2013 Advisory Board report indicated philanthropic revenue accounted for approximately 42% of available hospital capital. Too often, the foundation is a back-burner issue, if it is even at the strategy table. The relationships within a community can be a powerful ally to a hospital seeking approval in its merger efforts – if the benefits are communicated early in the process to these donors.

This series explores the inner working relationship between a hospital foundation and its parent during a sale. The author, John Gilchrist, FAHP, CFRE, has lived through one nonprofit sale and is experiencing a second sale. His insights into this process can prove to be excellent counsel to an organization going through a merger or acquisition.

M&A Activity Likely to Continue in the Non-Profit and For-Profit Hospital Sector

Hospital mergers and acquisitions (M&A) are occurring at a rapid pace and many more active discussions are happening in hospital boardrooms across the nation. The PWC 2nd quarter 2014 Health Services Deals Insights report states M&A activity is likely to continue in two largest components (non-profit and for-profit) of the US hospital sector. 87% of US hospitals are at least considering some form of alignment with other hospitals or hospital systems (DHG Healthcare Winter 2013 – What Hospital Executives Should Be Considering in Hospital Mergers & Acquisitions).

This series of reflections is not meant to be offered nor construed as any professional advice. I seek to share the experience of going through a non-profit hospital sale as it pertains to its related fundraising foundation. My hope for the reader is to increase awareness of the possible ramifications of this scenario in the accountable care organization (ACO) era.

One can imagine the feeling of a 6:50 a.m. call on January 13 for a mandatory senior management meeting at 8 a.m. The CEO informed us the hospital system would announce later that day of its intention to sell the system, in whole or in parts, to any qualified buyer. The reasons were many, but they centered on size, scope and essentiality. Size relates to a system’s ability to secure low cost capital and to extract best pricing from suppliers, among other factors. Scope focuses on care integration to reduce costs and improve quality – hardly an impossible task with sufficient resources in clinical documentation and utilization management tools, for example. Essentiality addresses market share vis-à-vis the competitive market. In order to negotiate appropriate reimbursement from managed care networks (MCN), the healthcare enterprise must have sufficient patient and provider market share in the community. If your enterprise can not reach an agreement with a MCN, the MCN must feel as much (perhaps more) economic pain as the enterprise in the absence of a contract. At that threshold real negotiations and genuine compromise can occur and lead to a livable agreement.

The announcement signified the beginning of extreme change for the hospital Foundation, its donors, board members, and especially you, the Foundation leader. Your professional life has just been turned upside down. One finds oneself asking questions like:

• What happens during the sale process?
• What if no qualified buyer is found? Is a Chapter 11 bankruptcy filing possible? Hospital closure?
• What economic signs were missed?
• What do you tell donors? What about the donor who just 13 days ago made his largest gift – a significant six-figure gift – ever?
• Will the hospital, and foundation, have to conduct layoffs?

More questions will follow in the ensuring days and weeks. Two suggestions: 1) Make sure you have a voice in the development of the post-announcement communications materials. 2) Address the implications for existing Foundation funds.

Consider this statement as your source of strength in these meetings: Donors embody a group of highly passionate supporters of your enterprise – you might be the sole representative of their interests.
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An article published this week by “D Healthcare” presents key statistics on the most profitable hospitals in North Texas. The data is useful to analyze and compare to hospitals in other parts of the country. Data on profit margins, net income, net patient revenues and occupancy percentages provide good benchmarks for comparison purposes.

Despite relatively flat inpatient occupancy rates, the cumulative profit margins for hospitals in North Texas have been above 12% in three of the last four years. One strategy that successful hospitals are using involves increasing their presence in neighborhoods to deliver primary care services, which includes partnering with retail outlets such as Walgreens, CVS and Wal-Mart.

The article notes that 740,000 people in Texas gained health coverage through the Affordable Care Act, however, that increase probably will not increase inpatient rates at hospitals; therefore, hospitals have begun to team up with retailers to expand their reach within communities to deliver primary care.

Those retail activities are in addition to hospital expansion plans that include the construction of new facilities. The article contains a link to a snapshot of the “healthcare building boom” going on in North Texas. The construction activity reflects several trends, including the aging baby boomer population and an increase in the number of people moving to Texas. The two fastest growing metro areas in the country in recent years have been Dallas-Fort Worth-Arlington and Houston-The Woodlands-Sugarland.

To review the data points on revenue, profitability, net income and inpatient percentages, see the article and its accompanying chart at: http://healthcare.dmagazine.com/2015/01/21/here-are-the-most-profitable-hospitals-in-north-texas-and-why/
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Keeping political opinions discreet is common sense, but hospital executives are facing added scrutiny from employers and board members. A recent article in Becker’s Hospital Review provides a helpful refresher course on the potential pitfalls of party politics: “CEOs considering a career move might see their political agenda come into question. It’s naive to think board members aren’t cognizant of politics when searching for a new chief, especially if the CEO candidate and hospital are from a red state and blue state.”

Executives may be faced with questions regarding their opinions on healthcare legislation. Additionally, the Federal Election Commission’s (FEC) contribution database provides a public record of contributions not only to political candidates but also to industry organizations. Avoiding endorsements of candidates as well as campaign contributions can be beneficial with regard to maintaining an air of neutrality, regardless of your personal stance on issues.

On the other hand, many executives are not reluctant to share their opinions. “Comb through the FEC database and you'll find many hospital and health system CEOs — including those at some of the most recognizable and largest nonprofit systems in the country — who aren't shy about their Democratic or Republican leanings.”

The bottom line is that it’s helpful to keep in mind the potential ramifications involved whenever you express your political leanings, particularly when those preferences have the potential to become part of the public record.

To learn more, visit Becker’s Hospital Review at: http://www.beckershospitalreview.com/healthcare-blog/when-it-comes-to-party-politics-some-ceos-put-on-more-of-a-poker-face-than-others.html
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Tagged in: healthcare industry
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Becker’s Hospital Review recently published an article on five common management mistakes within health systems that lead to failure and business erosion. The first among those listed was inadequate development of the next generation of leaders. When organizations neglect to develop second-tier leaders who can replace outgoing executives, the organization can struggle. According to the article, “many great health systems with wonderful CEOs do not have the depth to steer and drive the organization for the next generation. In fact, this lack of depth in leadership often causes systems to look for strategic partners.”

According to a survey administered by the Society for Human Resource Management, employees indicated that the most important factor in their job satisfaction involved opportunities to use their skills and abilities. The article states that many health systems have been guilty of not allowing great leaders to thrive, and that “a core job of leadership is to constantly be grooming and working closely with great people so there are always opportunities available for those people to thrive.”

Another common error in leadership involves inadequate planning for rapid changes in health IT systems, including revenue collection systems. As a case in point, one successful hospital fell into bankruptcy due to “uncollectibility over a sustained period of time.” CMO of McKesson Enterprise Information Solutions, Michael Blackman, MD, recommends that providers anticipate and plan for their IT needs well into the future.

Failure to develop a strong marketing brand in conjunction with a business strategy is another common oversight. Many community hospitals have seen their businesses decline because they neglected to define and differentiate their services from competitors.

The article also notes the potential pitfalls of expansion plans. One hospital deemed “hyper-successful” added a second facility, but ended up splitting cases with the first facility. The initial facility, which was highly profitable, was in essence replaced by two facilities that were both significantly less profitable.

You can view the article at Becker’s Hospital Review: http://www.beckershospitalreview.com/hospital-management-administration/5-core-management-mistakes-in-health-systems-key-causes-of-failure-and-business-erosion.html
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Each year PricewaterhouseCoopers (PwC) interviews industry experts and healthcare consumers to produce a list of top issues impacting the industry. This informative report, which was published last month by PwC's Health Research Institute (HRI), devotes one page to each of the Top 10 issues and delves into the implications that each issue will have on the industry. Key data points are clearly presented and the report is a valuable resource for assessing major trends in the industry.

Citing a “profound transformation” occurring in the industry, PwC says “the healthcare sector will begin to look and feel like other industries, catering to audiences expecting one-click service [and] consumers are leading the way, bearing more of the cost of their own care—and making more decisions.”

Healthcare consumers are more price-conscious than ever before, with 82% indicating that price is an important factor when making decisions about healthcare. That trend is coupled with more physicians embracing “do it yourself healthcare,” including mobile health apps that monitor a patient’s vital signs, analyze blood, track medication adherence, etc.

Some of the key trends noted in the report include an unprecedented level of data sharing and transparency; the need for healthcare organizations to revisit regulations that allow non-physicians to provide more services; a requirement to fully integrate data from electronic medical records throughout the enterprise; and the need to pursue strategic partnerships that encourage innovation, lower costs and fill gaps in business operations.

You can access the PwC report at: http://www.pwc.com/en_US/us/health-industries/top-health-industry-issues/assets/pwc-hri-top-healthcare-issues-2015.pdf
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CMS is developing and testing new payment and service delivery models in accordance with the Affordable Care Act and other legislation. Some models are designed to demonstrate whether various approaches are more effective than others at improving care and/or fostering innovation in the healthcare industry. There are seven broad categories used to group the models:

● Accountable Care
● Bundled Payments for Care Improvement
● Primary Care Transformation
● Initiatives Focused on the Medicaid and CHIP Population
● Initiatives Focused on the Medicare-Medicaid Enrollees
● Initiatives to Speed the Adoption of Best Practices
● Ways to Accelerate Testing of New Payment and Service Delivery Models

CMS provides a website (link below) that displays the various models and their current status, for example, whether they are Under Review, Accepting Applications, Ongoing, No Longer Active, etc.

The information available at the website can help you stay informed about changes as they evolve; other resources allow you to identify hospitals and other healthcare providers that are participating in the various programs.

As an example of the type of information that is available, one “demonstration model” tracked patients after they left the hospital to determine whether hospital-physician collaborations prevented complications, avoided duplication of services, improved quality and/or eliminated unnecessary costs. You can access these resources as well as other data and reports at: http://innovation.cms.gov/initiatives/index.html#views=models
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Almost three-quarters (71 percent) of ER doctors who responded to a survey said they treat patients every day who come to the ER after first seeking help at urgent care centers. Over 2,800 members of the American College of Emergency Physicians (ACEP) participated in the survey, which was published this week.

Sixty-five percent of the respondents indicated that patients are redirected to the ER due to the lack of needed equipment at urgent care centers or due to limited staffing. Ninety percent of the ER physicians said the top reason that patients were being redirected was due to the fact that the patient’s medical condition was more serious than could be treated at an urgent care center.

Many urgent care centers are being marketed as substitutes for emergency care, however they are often more suited to address common medical problems, such as sprains or minor cuts that require stitches.

Other results of the survey include the following:

>> 86% of participants said at least one urgent care center operates within 10 miles of their emergency department; 76% said there was more than one.

>> 21% reported a decline in emergency visits while 16% reported an increase in ER visits.

>> 51% said urgent care centers will pull patients from both ER care and primary care, while 22% said that urgent care centers will pull more patients from primary care.

>> 90% reported that patients were unable to determine whether they should seek medical care at a hospital emergency department or an urgent care center.

You can download the 28-page report via the link listed at the bottom of the ACEP news release at: http://newsroom.acep.org/2014-12-08-urgent-care-or-er-for-holiday-injuries-new-poll-says-some-patients-get-it-wrong
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Tagged in: healthcare industry