Competition is often cited as the key to controlling healthcare costs, but when two systems compete in a small market, it’s often quality that gets discounted – not prices.
By Dawn Carter
A Population Health Center operated jointly by two competing healthcare systems might seem like a pipe dream, but there is no reason it couldn't work, given the right motivation and market dynamics.
That was the situation Ascendient found recently in a rural county of fewer than 100,000 residents where two strong regional systems operated separate hospitals at the fringes of the county. Neither system was inclined to disinvest, even though it was apparent that two hospitals diluted the level of services that could be delivered in the county and that continued investments in bed towers would not drive more services or improve population health.
In a surprising move, the competing systems engaged Ascendient to help envision what healthcare transformation could look like at the county level. After months of research and analysis, we landed on an equally surprising conclusion: Competition merely sustains an unhelpful status quo, while cooperation allows a complete rethinking of population health at the county level – and even the meaning of a hospital.
With cooperation from both systems, we were able to research specific health needs and utilization rates at the county level. Then, starting with a blank sheet of paper, we asked the question: “If county residents are getting the primary care they need every day, where do you put the beds that are needed for once- or twice-in-a-lifetime major medical events?”
It turns out, maybe you don’t put them in the county at all.
From Hospital to Population Health Center
That blank sheet of paper turned into a roadmap for moving beyond the traditional hospital to a Population Health Center, located in geographic heart of the county, that is much better matched to the needs of county residents.
First and foremost, the PHC is a pod-based facility designed to house services that people use day in and day out. That starts with a Primary Care Medical Home offering extended hours, same-day appointments, and virtual care. Staffing for primary care is focused on the seven most pressing chronic needs as determined by local research: COPD, stroke, kidney disease, congestive heart failure, depression, substance abuse, and diabetes. For each of these disease states, care is delivered by integrated practice units comprising primary care physicians, dieticians, behavioral health clinicians, and more.
Moving beyond primary care, the Population Health Center houses multi-specialty clinics for the most utilized services in advanced care: cardiology, pulmonology, and endocrinology. In a county that can’t support full-time staffing, specialists are rotated through the clinic – or accessed virtually – because regular, convenient access helps to avoid more costly ED and inpatient utilization.
The modular design of the PHC means additional services may be offered as needs change. Imaging, pharmacy, and food pharmacy are core components, while physical therapy, senior care, and health education facilities are possible, depending on utilization and revenue trends.
Making Dollars and Sense
Of course, none of this happens overnight, and the transition to a Population Health Center has to make financial sense for the two incumbents, given their heavy investment in existing facilities.
Eventually those facilities may be allowed to simply age out as improving population health reduces the need to spend more on bricks and mortar – or higher-order services typically associated with a hospital could migrate to the centralized PHC campus. In the meantime, legacy hospitals are an integral part of the transition to population health because they serve as spokes on the wheel of community-based care.
With a coordinated approach, both systems can begin to see immediate savings by cutting expensive, duplicative services. One hospital, for instance, will maintain its operating rooms and inpatient beds, while the other shifts quickly to a Primary Care Medical Home with a freestanding ED, plus space to house community paramedicine and mobile integrated healthcare teams.
The U.S. healthcare system, unfortunately, is not structured to incentivize cooperation on population health, so a countywide effort like this one requires careful business planning on the part of both systems. For us, that meant adhering to three structural principles:
- Equitably share in the risk and rewards of countywide healthcare services
- Create aligned incentives between the organizations
- Collectively deliver services and care, drawing on the strengths and relevant assets of each party
We believe these principles are required for any cooperative delivery model, but there is no single, prescribed way to get there. For our clients, we outlined two possible levels of joint venture incorporating assets and services based inside and/or outside the county. Each JV measures up slightly differently on the structural principles outlined above.
Alternatively, a contractual approach would offer comprehensive ownership and management arrangements that allow each system to maximize its capabilities. For instance, one system could own the real estate while the other operates most services and manages population health. Though this is the least integrated option, it could offer immediate benefits while serving as “proof of concept” for a future JV.
The move toward population health is a key feature of healthcare transformation and a key focus of Ascendient's strategic advisory services. The transformation process will look different in every community, and no market will be immune. Fortunately, as this case study proves, healthcare leaders in even the smallest counties can get ahead of the trends to ensure accessible, sustainable, and high quality care for community residents.
