Inova president: Health systems entering ‘new normal’ of fewer patients

May 14, 2013, 1:54pm EDT

Inova president: Health systems entering ‘new normal’ of fewer patients

Ben Fischer

Staff Reporter- Washington Business Journal

Thanks to its profitable suburban locations and strong credit rating, Inova Health System has rarely encountered "business problems" as a non-health care provider might define them. But in a wide-ranging conversation Tuesday, Chief Operating Officer Mark Stauder said times are changing.

Inova’s overall patient load has declined 3.5 percent so far in 2013, year over year, and executives think it’s not a short-term blip. In fact, to a great extent it’s by design, a.k.a. health care reform. Read on for his thoughts on what that means for the system, its patients and business partners.

How is health care utilization at Inova this year? Let me step back and talk a little bit about Inova’s perspective on the evolution on what’s happening within health care today. We think this is really a beginning of a new normal, or a tipping point in the change within health care. For decades, this country has lived in a fee-for-service environment, and over the last several years, we are moving towards a value-based health care system, moving away from volume and moving toward value.

I think this is exemplified in the federal government’s movement around [accountable care organization] demonstration projects. I think it’s exemplified in employers making significant changes in their health plan design around consumer-based health plans, around high-deductible health plans and really encouraging patients and families to share in the cost of health care, so it becomes a very personal decision around the consumption of health care. For many decades, individuals and families have been insulated from the cost of health care, and we think that’s changing now with new health plans that employers seem to be adopting at a very very rapid pace.

With that evolution, with those changes, we actually believe we’re at a tipping point and we’re going to see consistently lower volumes over time. And that’s consistent with moving away from a fee-for-service environment and moving toward a value-based environment where physicians are being more cautious about ordering tests, [and] individuals and families are being more cautious about using health care, especially services that are elective.

Is Inova seeing fewer patients in real time, or do you mean over the coming years? We measure things in what we call equivalent admissions, and that’s a combination of inpatient care, observation care and outpatient testing. First quarter, we’re down about 3.5 percent, year over year. And that’s pretty consistent with what we’re reading from (publicly traded health care companies) Health Management Associates, Universal Health Services other national providers, including commercial health care businesses such as Johnson & Johnson, Abbott Laboratories or St. Jude Medical. I think we are seeing a tipping point in national health care across the country, and we believe this is just the beginning of that future trend.

Local and state governments have long counted on health care to lead their economic development efforts. Are they overestimating its future? This is Mark Stauder‘s opinion, this is not Inova’s opinion, this is my opinion, but my sense is that overall utilization across the country and in this region will trend down over time. And the only offset is going to be if population growth grows faster than the utilization declines. And I think given the state of this economy across the country, I think there will be very few markets where populate grows enough and quick enough to offset utilization decline.

What about the aging of the population? That’s another trend, but you’ve got to realize that the federal government is really [incentivizing] and asking providers to come together, hospitals [to] come together and form [accountable care organizations], to really manage for that triple aim: higher quality, higher service, lower utilization and lower costs. So even in the Medicare population the national focus is on that triple aim.

Do you believe Virginia will expand Medicaid? We are very hopeful and very supportive of expanding the Medicaid program. The state legislature voted to have a two-step model: medicaid reform and then Medicaid expansion, as it’s reviewed and affirmed by the bipartisan commission. We’re very hopeful. We think it is the right public policy to have everyone covered, and everyone insured to make sure we’re driving wellness, we’re driving prevention and driving health.

Is Medicaid expansion a material factor in the performance of your hospitals, or do you approach this as a general public policy position? Inova is the largest nonprofit health care provider in Northern Virginia, and we’ve got a mission to take care of everybody. Today, we provide $350 million in charitable services to underinsured and uninsured patients at cost. So clearly, if the state decides to reform and expand Medicaid, there will be funding for a portion of that group of patients that is currently receiving charitable services or free services as part our nonprofit mission. From a public policy perspective, we believe we can have a healthier population if everybody’s insured.

How’s development of your cancer center? Things are moving ahead briskly. We’re going through the site development, the architectural development, its going to be about 250,000 square feet of cancer services, cancer research and academic services, and we hope to have the planning done here and the drawings complete, and we hope to begin construction in 2014. And hopefully then we’ll occupy in late 2016 or early 2017.

What about the required certificates of need? Will those be difficult? That’s moving in parallel. No, this region needs a significant comprehensive cancer program. This will be the dominant comprehensive cancer program in the northern Virginia/D.C. region. And with the population aging, you know, cancer is going to continue to be one of the most significant diseases we’re going to have to deal with, and that’s where our genomic research and clinical trials will hopefully discover new and productive approaches in prevention and cancer management.

Will you pursue National Cancer Institute designation? That’s something that’s under study at this time.

Inova has committed or spent more than $1.7 billion to rebuild its hospitals, install a major new computerized patient record system, launch its Translational Medicine Institute and the cancer center. Will this pace of development and spending continue, or have we reached the downside of a cycle? I think we’re continuing to invest in the region, to continue to be the significant leader in health care provision, new clinical services, and innovation within the Northern Virginia region. Everything we’re investing in, we believe is going to be accretive long term. Patients are seeking new accommodations, they’re seeking wellness, comfort-oriented confidential environments for receiving health care services. Information technology is critical — we’re really in the information management business, and our clinical effectiveness is only as good as our information systems. We believe that these are all fundamental elements of maintaining building, and evolving a world-class health care system.

But is more coming? We’re just continuing to focus on kind of this new normal. We don’t have any major announcements we’re planning. We’re continuing to think through the evolution of health care, and making sure we are a world-class provider of health care services, that we are integrating, that we’re leveraging our intellectual knowledge within the system.

Are you still working to acquire doctors’ practices as a strategy? We are careful and thoughtful about physician acquisition. We are acquiring practices — primary-care practices and select subspecialties. I would say it’s a thoughtful, careful and measured approach.

How many primary-care doctors do you have employed now? We have about 50 physicians. In Northern Virginia, our medical community is still probably 85 percent private-practice physicians. Again, I think our physicians have had a very good place to practice here, and I think they’re satisfied working in small groups, and that’s worked well for them.There’s a number of different alignment approaches. No. 1 is the traditional medical staff relationship, No. 2 is an employment model. and No. 3 is a narrow-network partnership model, which we are currently developing called Signature Partners. That is a model to begin to take risk together, to enter relationships with insurance companies together and to manage care together without necessarily requiring employment.

Ben Fischer covers health care and law.

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