HIMSS: Airline strategies may help Ochsner survive $1M/month pay cut

NEW ORLEANS—Healthcare may survive the massive challenges it faces by adopting the business strategies of the airline industry, Warner L. Thomas, president and CEO of Ochsner Health System in New Orleans, told the audience during a keynote address March 4 at the Healthcare Information and Management Systems Society (HIMSS) annual conference.

It’s no secret that both healthcare customers and providers are being squeezed, with the industry teetering on the verge of crisis. “For many middle-class Americans, healthcare is becoming unaffordable,” Thomas said. Health insurance deductibles have increased 63 percent, which dwarfs the 13 percent rise in household income.

On the provider side, the sequester translates into a 2 percent cut in hospital revenue beginning April 1, or $1 million every month at Ochsner. And the government, historically healthcare’s worst payer, is going to be the industry’s largest payer in the next several years.

“The business model has to shift from a volume mentality to value model, and manage population health. Many organizations are not well-positioned to do that,” Thomas said.

However, Ochsner employs an integrated model, which positions the organization for global payments and global capitation, he continued.

Nevertheless, Ochsner, along with providers, needs to approach its business differently. In the next few years, providers will set the stage for healthcare delivery for the next 10 to 20 years, according to Thomas. He recommended adopting strategies from other industries that have experienced such dramatic shifts and offered the airline industry as an example.

In 1995, the industry served 460 million passengers, and the top three airlines controlled 40 percent of the market at a cost of 13.4 cents per mile flown. In 2010, the industry served 700 million passengers, and the top three airlines controlled 70 percent of the business at a cost of 12.7 cents per mile despite increases in fuel prices and 10,000 fewer employees.

How did the airlines achieve the turnaround? “They took out all of the excess capacity. There are fewer choices, and passengers now do their work for them,” Thomas said. Customers book their own tickets, choose their seats and check their bags. The banking industry has adopted similar strategies, observed Thomas.

Healthcare can adopt this model, encouraging patients to book appointments and check results online. As patients assume these responsibilities, providers can redeploy staff and grow their business by delivering what patients want—safe, high-quality healthcare; new therapies and treatments; access and affordability; coordinated care and easy-to-use systems.

This change not only requires healthcare to mirror strategies used in other industries, but also on the health IT level, to redefine a successful health IT project.

A successful IT install, said Thomas, should provide safer, higher quality healthcare more effectively and make employees more productive and happier.

A final ingredient to enable the shift falls on vendors’ shoulders, said Thomas. Companies that market health IT systems need to partner with healthcare providers to solve these challenges, rather than limit themselves to product sales, he concluded.