Will Hospitals Transition to Value? Yes For Some, But Not For All.


Welcome to Healthcare PittsStop. Today I feel blessed to have Dr. Keith Marton, the former Chief Medical Officer for the Providence Health and noted authority on quality and value in healthcare. I’ll [be talking] to Dr. Marton today about the evolution of the care delivery network and the transition from the fee-for-service to value-based models.

Welcome Keith. I’m glad to have you.

I’m delighted to be with you, Alan.

Keith, you and I have both lived through this [transition] where we have experienced the fee-for-service to value-based models that came out of the Obama administration’s recent legislation. Can you comment about that evolution and what you see coming?

This evolution has been a long time coming. Big societal changes—and I count this as big a societal change as we have seen in several generations—usually take a long time, and they are propelled by multiple conversations. I can think back on conversations that started 30 years ago, but they really didn’t get very far until the passage of the Affordable Care Act, and more recently with the passage of MACRA, which changes the way physicmartonfotoians are going to be compensated for the care that they provide. I think these things are really propelling the changes. They are manifestations, however, of a societal and political realization that the way in which we have paid for care in the past has resulted in overuse of healthcare and higher expenses to healthcare, without any real benefit in healthcare. And I think that’s the real transition: that we are now not thinking only about cost but about quality. Another way of thinking about it is cost benefit.

Can you speak about any healthcare systems that you’ve seen that have been successful in making this transition?

If you think about a full transition, no. Nobody has made a full transition from fee-for-service to value-based, and a lot of that has to do with the fact that the payment models out there are still based primarily on fee-for-service. Probably no more than about 10 to 15 percent of the payment models in the country are what I would call value based. There are systems, however, that are well on the way. One that I am very familiar with is the Saint Joseph Health System, which in July of this year became the Providence Saint Joseph Health System. As much as 40 percent of their payment is through risk-based models, which is one of the highest in the country. But I think that’s also true for most West Coast systems. They are functioning on much more of a value-based payment system than most other parts of the country. They have learned how to function within a value-based payment system by making a wide number of changes—we can talk about what those changes are—that are going to be necessary for managing to thrive in a value-based system. But nobody has gone to full risk based, unless you want to [take] Kaiser as an example. Of course, Kaiser is self-contained; it’s both a payment model and a delivery model.

Of course, Kaiser’s not fully there. I know for instance that Kaiser’s billing office still sends out bills to their Medicare patients. So it’s kind of a mixed bag.

That’s right. That’s because their payer is the federal government, but that’s going to change as well.

I feel bad for the CEO at my hospital [and elsewhere] because they’re straddling this line where—to keep the lights on—they’re working on the current system of fee-for-service, but they’re getting a mandate from the CEO of the corporate structure—I know Lloyd Dean’s made a public pronouncement that he wants to go from 25 percent to 50 percent at-risk contracting. So the local CEOs running the hospital are kind of in the middle there, where they don’t know exactly what to do. If they rush too quickly their hospital’s going to go under; if they don’t do it, they’re going to go under later. Do you have any suggestions for today’s hospital CEO about managing this transition?

My suggestion for the hospital CEO—and this is rather blunt—is to get out of the way. The hospital CEOs have been raised in the traditional fee-for-service model. They are moving from being the center of the healthcare enterprise to being on the fringes of the healthcare enterprise, in the most extreme sense of the word.
Where the action takes place is not in the hospital; it’s outside of the hospital. It’s in the community. It’s in the outpatient clinics. It’s in the ambulatory surgery centers. It’s in the outpatient imaging centers, to take an example that you’re very familiar with. It’s in post-acute care. It’s in the home. Most healthcare systems are moving to [a model where] more than half of their revenue is coming from outside the hospital. The issue for the hospital is that to thrive in a modern reimbursement system—a population, value-based healthcare system—you want to use the hospital as little as possible. So hospitals in many places are going to have to shrink. I know in saying this that in many parts of the country hospitals are still growing, because the demand is still there, particularly for e
mergency services and intensive care services, but the reality is that if we continue in the direction we are going, the need for hospital beds will decline.

I’ve talked to some executives at systems and they just don’t believe that the IDNs—the large care delivery networks—are going to get there on their own. That it’s going to be 5 to 7 years, and then there’s going to be blood in the streets, really a dramatic change. Do you believe that this is going to be a slow change to value, or are people going to hang on to the current system of reimbursement till the end?

That’s probably one of the most central questions, and I don’t think we fully know the answer. I do see several patterns emerging. One is that there are certain parts of the healthcare enterprise that are going to hold on as long as they can. Probably the best example is the large academic medical centers. They do extremely wel
on the fee-for-service basis. Because they’re referral centers, they provide services that often can’t be obtained anywhere else, and they’re rational in their reluctance to not move away from that fee-for-service basis.

On the other hand, there are several forces that are going to push the changes that I think are inevitable. One is that there are a lot of new entrants into the healthcare marketplace—non-traditional entrants. These are places as unusual as Walgreens, Walmart, and CVS. They’re providing competition to the healthcare systems. There are also non-traditional entrants that are small innovators, entrepreneurs. And we’re starting to see a lot of new ideas in healthcare delivery that are coming from outside the healthcare industry but are threatening it. Right now they’re at the edges, but it may not be that much longer.

Finally, what I think we’re going to see is sort of a bifurcation of the healthcare system. Those that are capable of managing the new compensation systems are the ones that are going to do well. But the others—and this is where your comment about blood in the streets may be true—we may see organizations fall by the wayside. We may see healthcare systems in the country fall into the haves and the have-nots, which would make me very sad.

You commented on the entrepreneurs. I have a thesis that the equity markets are really falling behind, that they’re looking at their portfolios and they don’t fully understand the transition that’s happening, and that they may lose a bunch of money. Do you have any thoughts for the investment community to consider with this coming change?

I have to expose a bias that I have here. One of the activities that I truly enjoy and appreciate is advising a small number of biotech startups. And I see them struggling. And I hear this from other folks that I do not advise, namely that there’s a shortage of venture capital money out there to invest in really good ideas. So I think the investment market is a bit behind. They’re a bit nervous, a bit frightened from what I can tell about investing in the complexity of American healthcare. And it is one of the most complex systems there is. In addition, I think some of the large payers are still very nervous about doing what I think is in their best interest, which is shifting risk away from themselves to other people—mainly to the providers and the consumers—which is what’s happening anyway.

Why are they nervous about shifting risk? That sounds like it would be to their benefit.

You would think so, but when you look around the country, it’s the hospitals and the health systems that are pushing the payers to shift their payment products. Payers— except in a few places in the country—seem to be slow in making these changes. Now, I’ve said I think they’re afraid to do it. I don’t really know that that’s the case. They are slow to do it, but I’m not sure why

That’s kind of counter-intuitive. You know I’m the father of a 3rd-year medical student and I’m seeing a real transition in the way my career went and the way her career [is going]. I’m wondering if you have any comments for the provider. What will it look like in an algorithm-driven healthcare economy? A lot of physicians are having a lot of angst about this transition, and I personally have a concern that many physicians are being overwhelmed by the necessity to report—what I’ll call death by data. Their lives are consumed by quality metrics.

I think this is one of the challenges for providers. But first of all, congratulations to your youngster for going into medical school. There are a lot of doctors who not encourage people to go into medical school. I happen to be the father of a practicing physician. She’s been out of medical school just a few years now. She’s mid career, and I still believe that medicine is one of the best careers that one could undertake.

Now, getting to your question about death-by-data and algorithm-driven medicine. The real place for a physician today is to provide context to patients and to help them make decisions. And to still provide the kind of expertise you do not get looking on the Internet. Where we are, though, is that physicians are overburdened by the need to document information. They are overburdened by having to use complex electronic health records that were designed primarily for billing purposes and not clinical purposes. I think we’re still a few years away from having the applications that are going to simplify the use of the electronic tools that are so necessary for delivering healthcare. And I’ve started to see pretty sophisticated clinical decision support tools that free up the physicians and are not algorithmic driven. Some of the best ones I’ve seen, for instance, don’t flood the physician with alerts. What they do is allow the physician to do whatever they think is right and only give them alerts when they seem to deviate from evidence-based pathways. [That way], physicians don’t get alert fatigue. So, [there is a] need to diminish the documentation burden, the need to allow physicians to be able to use their expertise.

But medicine is so complex today; the amount of knowledge one has to have cannot be kept all in your head. You need to have tools at your fingertips to help you think through complex situations. I’m not so worried about the algorithmic approach to some of the more common things. I’m more optimistic about the fact that physicians will be given the tools that enable them to really reveal their expertise, their skill, and their training.

I’m certainly glad to hear that. I don’t often hear a positive [take on the future from many of my colleagues. But certainly you have a bird’s eye view of how things are going. Keith, I want to thank you again for your willingness to come and talk to me today. Do you have any last comments before we go?

I think this is one of the greatest transformations in healthcare that I have ever experienced in my lifetime, and it is moving at a lightning-fast pace compared to the way things have changed before. What I want to remind physicians is that you are some of the brightest, smartest, accomplished people in our society. And physicians are in a position to help drive changes in the direction that are good for society and that are good for patients. There is no place to be a victim given the skills and the talents that physicians have. I think it is up to physicians to take a leadership role in the transformation of the healthcare system. The more that they do that, I think the better off our country will be.

Keith, thank again. I appreciate your time.

Reader Interactions


Leave a Reply

Your email address will not be published. Required fields are marked *