Regardless of the form it takes, clinical integration of hospitals with physicians is not easy, with a range of obstacles—from logistics to philosophical differences—posing significant challenges. That's what two health care executives—Dan Wolterman, president and CEO of the Memorial Hermann Healthcare System in Houston, Texas, and Alyson Pitman Giles, president and CEO of Catholic Medical Center (CMC) in Manchester, New Hampshire—told attendees at a session on physician integration and alignment held during the American College of Healthcare Executives' 2011 Congress on Healthcare Leadership in Chicago, Illinois, in March. Wolterman adds, however, that the endeavor is worthwhile.
Memorial Hermann (MH) works in two "spheres," the executive notes—University of Texas Health, with about 1,200 physicians, more than 800 of whom are clinical physicians; and MHMD, an independent physician association with 3,500 physician members. MHMD decided to focus on clinical integration in 2005. "The Federal Trade Commission (FTC) didn't like the fact that physicians who weren't economically integrated were trying to contract, and wanted us to say we wouldn't do that anymore except as a 'messenger' model," Wolterman says. "But starting in 2002, we had also begun trying to reinvent our system as a national leader in quality and safety, and were looking to engage physicians in reinvention when they did not wish to be employed."
Integration at Memorial Hermann
Six years ago, this gave rise to complete clinical and economic integration, which meant physicians could collectively enter into contracts with payors without running afoul of federal antitrust laws. In preparation, imperatives to be followed were formulated to ensure that quality of care would remain at an all-time high and that national benchmarks would be met. These included developing a structure to reduce cost and improve quality; monitoring performance and comparing it against best practice standards; embedding evidence-based medicine; and creating enterprise-wide standardized protocols and order sets.
Of MHMD's physicians, 2,000 are currently considered clinically integrated "core" physicians, who, Wolterman says, were required to adhere to four criteria in order to become part of the integrated network. These criteria included a commitment to participating in evidence-based medicine, protocol development, and implementation; utilizing a preferred electronic health record platform; submitting quality data for inpatients and outpatients alike; and agreeing to the transparent use of data to elevate quality and reduce costs. Quality data is accessible via the Internet, rendering it entirely transparent. "If you're not committed to evidence-based medicine, it won't work," Wolterman says.
He adds that a carefully configured infrastructure goes far toward enabling such criteria and commitments to be met. Notably, 18 specialty-specific clinical programs committees regularly meet to develop protocols, monitor performance, formulate product decisions, develop new products, evaluate payment opportunities, and monitor patient/physician satisfaction. Committee members hold each other accountable for accomplishing these tasks, which are managed via a fully integrated IT platform. A 20-member board of directors, all of whom are MDs, handles overall governance. The board focuses on collecting, reporting, and managing quality outcomes, as well as the joint determination of clinical utilization targets for contracting and performance.
Wolterman says the clinical integration has yielded a 33% improvement in average charges, along with lower lengths of stay and fewer complications and readmissions. "We are now able to show the marketplace—self-insured employers—concrete results, and to contract with this narrower network," he says. "This is compelling data that allows you to go sell. Your better market is probably self-funded employers. It's a tough sell with insurance companies, though not impossible."
Challenges and Considerations
Not surprisingly, MH learned several lessons from the process of achieving clinical integration, among them that there exist certain structural and regulatory barriers to the model. While these are not insurmountable, Wolterman observes, entities that want to embark on an identical path must understand that when an independent hospital system contracts with an independent practice association, economic integration has not been achieved, and the FTC has not issued any clear-cut criteria in this regard.
Under such circumstances, he says, payors may ask why they would want to pay clinically integrated physicians 115% of Medicare, when they have "everyone in an individual contract at 85% of Medicare." Further, they may say that they already have everything for which they are being asked to contract and claim they will package and market it themselves, given that they already "have" the physicians at 85%. It is possible to circumvent a situation of this type of argument and forge ahead successfully, but perhaps only when there is a large employed physician group to bring to the table, the executive says.
In addition, Wolterman says, time has taught MH that even under the best clinical integration circumstances, physicians will push for payback. "We have a great program with lots of success for our hospital system, and our quality is superb," he explains. "A good deal of that is attributable to the clinical integration effort, because the physicians are working with us as partners, but they're now asking where the payday is and what is in it for them. The payor contracts aren't there, and it is becoming a little restless."
Just as significant a lesson is the need to comprehend clearly the relationship between a clinically integrated entity and organized medical staff—particularly if a multi-site system is involved—as organized medical staff, having been set up "for another time and another era," can be "dysfunctional," Wolterman says. Accordingly, MH has implemented a policy wherein best practices developed by committees must be followed by members of the medical staff. Should medical staff not adhere to these practices and an adverse outcome occurs, the chief of staff must explain and offer a rationale for the situation to the board of directors.
MH has recently turned its attention to prevention and wellness solutions and, as such, made MHMD a component of its application to become a Medicare-certified accountable care organization (ACO) under the Patient Protection and Affordable Care Act. "We think clinical integration will be a vehicle and a platform" for attaining ACO status, Wolterman says. "We want a well-established, geographically dispersed primary care physician (PCP) network, expanded insurance and risk assumption capabilities for a future of bundled payments/capitation, and to build a robust chronic disease management program. Once those premiums come in, all we have to do is show how we're going to share the savings."
Stopped in Its Tracks
On the opposite side of the coin, Giles said, Catholic Medical Center encountered a seemingly endless series of obstacles in its endeavor to integrate its operations with physicians; plans to integrate with the Dartmouth-Hitchcock Clinic (DHC) in Hanover, New Hampshire, were thwarted by everyone from local activists to the media. "I'm trying not to sound quite so bitter, but it has been bitter," Giles noted as she shared with attendees several newspaper accounts attacking her and the affiliation plans, first proposed in February 2009.
The state of New Hampshire presently has 1.3 million residents, she says. Most physicians are employed; independent physicians in Manchester specialize in radiology, orthopedics, urology, ENT, pathology, and anesthesia. All cover both CMC and Elliot Hospital, also in Manchester. CMC employs 24 PCPs, 22 cardiologists, five general surgeons, and no other specialists. It services 32% of the primary market and 20% of the secondary market, with a tertiary presence permitting it to draw 28% of its patients from outside the area. Elliot Hospital, which employs 58 PCPs and is adding to its staff or has in place specialists in most other disciplines, covers 53% of the primary service area and 27% of the secondary area.
Lessons from the Past
CMC is not new to the concept of integration. Formed by a merger of two Catholic hospitals in 1974, it merged with Elliot Hospital in 1994, but the "marriage" was dissolved five years later due to differences in culture, radically different stances on abortion, and a broken promise that the two hospitals—which were operating under the name Optima Health—would share functions. Within three months of signing the merger agreement, a decision was made to close CMC.
While CMC was subsequently "saved," the other issues continued to cause problems. In 1998, the New Hampshire Attorney General issued a report that the two hospitals had failed to reconcile their charitable missions prior to joining forces, and ordered each institution to form a board to address their problems. However, after months of unsuccessful negotiations, both boards recommended in February 1999 that the two hospitals separate.
"We weren't ready to give up," Giles says. CMC obtained 50% ownership in an ambulatory surgery center; acquired high-tech equipment, such as two surgical robots and an o-arm spinal imaging system; quadrupled its New England Heart Institute business to serve 100 New Hampshire communities; hired a physician/IT professional to oversee computerized provider order entry and electronic medical record (EMR) implementation; and empowered the chief medical officer to oversee quality and risk on a full-time basis. Revenues tripled, and physicians, many of whom had defected, returned to the fold.
New Approach to Integration
When the idea of integration once again surfaced, CMC decided to attempt a clinical integration with Manchester's Dartmouth-Hitchcock Medical Center (DHMC), which has about 175 employed physicians, including specialists. Under the proposed affiliation, originally filed with the Hillsborough County Probate Court on June 21, 2010, the DHMC facilities in Manchester would have integrated physician practice group services with the services of CMC under its parent company, CMC Healthcare System.
"We looked at it and thought it wouldn't make sense to replicate, with an affiliation, what Elliot had already done, when among the three of us we didn't need much," Giles says. "The clinic wanted a formal relationship with a hospital partner for an integrated delivery system, which appeared to be a perfect match for us."
The two entities began collaborating on an agreement, keeping at the forefront the shared goals of preparing for the advent of accountable care organizations (ACOs), establishing a common EMR, alignment among the hospital and all physicians, the use of evidence-based protocols, and willingness to "bend" the cost curve. To address what was perceived as the most contentious issue where the integration was concerned—"a Catholic hospital joining with a secular provider," Giles recalls—DHC agreed to abide by Catholic ethical and religious directives, declining to perform abortions, in vitro fertilization procedures, and stem cell research; a "vetted" program with canonical reviews to ensure that all parties' needs would be met was developed.
Then, Giles says, activists and the media became involved. The former, she claims, wrongly accused CMC of allowing prohibited reproductive services through the affiliation, while women's rights groups wrongly accused CMC of denying those same services through the affiliation, despite the fact that the agreement properly addressed both concerns. The media learned of and covered prayer vigils that were being held outside CMC daily, and the local newspaper ran not only articles but also cartoons that allegedly slandered Giles, who subsequently hired a slander attorney.
At the time of the session, the two entities were looking at how, in the midst of these difficulties, to create a system that would focus on quality and ACOs, and how to work together without running afoul of federal regulators. Shortly afterward, on March 29, 2011, a decision to end plans for the integration was announced because of opposition from pro-life and pro-choice groups alike, and because of what spokespeople for both hospitals deemed "changes in health care reform." Today the two entities have no plans to integrate.
Julie Ritzer Ross is a contributing writer for HealthCXO.