Five Strategies for Hospitals to Help Prepare for Financial Challenges Ahead

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Jan Jennings
Jan Jennings

By Daniel Casciato

Jan Jennings’ frustration with the financial challenges hospitals are facing was evident within a few seconds of our interview with him.

“The typical American hospital is very poorly run,” says Jennings, president and CEO of American Healthcare Solutions.

For Jennings, one of the reasons hospitals are financially struggling can be traced back to leadership.

“There are some people in management positions across the country who are totally unqualified to run an American hospital,” he says. “They lack the training necessary to work in a hospital leadership position.”

He fears that the situation could get worse which could lead to more hospital mergers and shutdowns.

“Today, we are spending 20% of the gross domestic product of the United States strictly on healthcare. Yet, you can get better healthcare in Ethiopia than you can in the United States,” he says. “Spending continues to increase and the American people cannot afford this level of spending any longer.”

To prevent healthcare costs from spiraling out of control and to prepare hospitals to meet financial challenges now and in the future, Jennings offers five strategies: multi-hospital systems; operations improvement; re-engineering in the form of Six Sigma; accountable care organizations and Planetree Healthcare.

Multi-Hospital Systems

Large hospital systems and medical groups continue to acquire smaller/solo private practices at a steady rate. According to the Physicians Foundation report pertaining to the future of U.S. medical practices, increased consolidation may potentially lead to monopolistic concerns, raise cost of care, and reduce the viability and competitiveness of solo/private practice.

Jennings is not opposed to the idea of merging failing hospitals with other successful systems.
He acknowledges that multi-hospital systems have had mixed reviews to date. Some have been extremely successfully, while many others have been disappointing.

“UPMC has been one of the most successful multi-health system in the U.S.,” he says. “In patient satisfaction surveys, UPMC has shown to be really fair in how their patients are treated in a hospital. Their system is one that works. Others include Sutter Health in San Francisco, Cleveland Clinic, and Healthcare Partners of Boston.”

The multi-hospital systems that have failed in the country are often the result of a poor merger, notes Jennings.

“Some cities, most recently in Chicago, have allowed failing hospitals to merge with each other under one system and hope that somehow they can overcome their financial troubles,” he says. “You cannot herd failing hospitals together hoping for a turnaround because they’re all losing money.”

If you’re going to assemble a multi-hospital system, Jennings offers these three objectives:

Drive out unnecessary overhead
Develop sufficient critical mass to challenge private health insurers
Develop a “feeder system” to drive high case mix patients to one or more of the “mother hospitals”

Operations Improvement

“Hospitals have been poorly run, with a few exceptions, from the time we started building them,” says Jennings. “Many hospitals today have hundreds of specific revenue or cost-related issues and need help with operations improvement.”

In addition, increasing administrative and government regulations were cited as one of the chief factors contributing to pervasive physician discontentment, according to the Physician Foundation’s 2012 Biennial Physician Survey. Excessive “red tape” regulations are forcing many physicians to decrease their time spent with patients in order to deal with non-clinical paper work and other operations burdens.

In addition to hiring better leaders across all hospital departments, Jennings offers these ideas to improve hospital operations:

Reduce costs and overhead
Improve productivity
File accurate cost reports
Increase the speed of the revenue cycle
Improve materials management

Re-Engineering

In early 2000, Seattle, Washington-based Virginia Mason Medical Center adapted Lean Six Sigma manufacturing practices to facilitate healthcare process improvement. According to Jennings, their method was so successful Virginia Mason created its own specialized model known as the Virginia Mason Production System.

“The new president of Virginia Mason at the time went to the board of directors and asked for ideas on how to better run the hospital,” says Jennings. “They decided to send him to Japan to work with Toyota and learn the Toyota Production System.”

After a year of mastering learned the Toyota Production System, he brought back many ideas to incorporate into Virginia Mason. In fact, they facilitated continuous process improvement for the health system across numerous areas, including direct patient care time, patient safety and revenue cycle.

“Today Virginia Mason is the only hospital in the state of Washington that makes money,” says Jennings.

The healthcare system has also seen its professional liability expenses decrease by millions of dollars for several years now and its self-insured retention requirement has dramatically decreased from the previous year.

ACOs

ACOs are expected to create a delivery model containing the clinical processes, financial incentives, and technology systems necessary to cost-efficiently provide quality care across the continuum. These ACOs will put providers at risk for providing care to a defined population by, for the first time, tying reimbursement to quality metrics.

“For us old dogs who first heard of ACOs, we thought they were PHOs in a new dress,” says Jennings with a laugh. “Of course, that was not the case.”

While Jennings embraces the concept of ACOs, he’s disappointed that about 20% of U.S. hospitals have developed an ACO.

“It turns out that very quietly the private health insurance market has at least 20 percent of hospital payments at risk based on the cooperation and documented demonstration by physicians, hospitals and the health insurer,” he says. “And the federal response to driving ACO’s out of the gate has been enormously disappointing to me.”

Planetree Hospitals

The Planetree Designation represents the highest level of achievement in patient-/person-centered care based on evidence and standards. This program is the only one of its kind in the country today to formally recognize excellence in patient- and person-centered care across the continuum of care.
According to Jennings, the designation program offers a structured, operational framework for evaluating hospital systems. The criteria to earn a designation is organized around 11 core dimensions of Patient-Centered Care, including structures and functions necessary for culture change; human interactions; promoting patient education, choice and responsibility; family involvement; dining, food and nutrition; healing environment; healthy communities; measurement and more, the criteria collectively uniquely capture the depth and scope of what it takes, in real terms, to implement and maintain a patient-centered culture.

To date, over 600 hospitals across the U.S. Have earned the Planetree Designation. Some Planetree hospitals include Windber Medical Center in Windber, PA, the Cleveland Clinic, and every VA hospital in the U.S.

“These health systems are designed to do things to excite the human condition and promote better healing through making the patient the centerpiece of the hospital delivery system,” says Jennings. “They’re not looking to hit ‘homeruns’ in patient care, but rather 500 singles at a time. These are the hospitals that have a chance in meeting the financial challenges ahead.”

For more information, visit www.americanhs.com.