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The Problem
“Aunt Mary” enjoys a big celebratory meal on Thursday evening while visiting with her extended family. But because the 75-year-old woman—who suffers from chronic congestive heart failure—doesn’t take her diuretic as directed that day, along with 14 other medications, she gains 5 to 10 pounds of water weight. Sometime on Friday she becomes short of breath and calls 911.
Paramedics rush her to a local hospital’s emergency department, where she is treated and stabilized by well-meaning doctors who have never treated her before and can’t access her medical records. They aren’t in touch with Aunt Mary’s primary care physician, so the doctors admit her for a few days to be “tuned up,” just to be extra careful. She returns home without genuinely understanding her new medication instructions. So Aunt Mary ignores her congestive heart failure until she finds herself in another emergency situation, and the cycle repeats.
Patients with chronic diseases, such as congestive heart failure, coronary artery disease, diabetes, and hypertension, and the often-accompanying depression, are the 10 to 20 percent who account for 80 to 90 percent of healthcare spending,1 simply because their care is not optimal.
Wouldn’t it be better to manage these “Aunt Mary” patients proactively in a true provider/patient/family partnership to improve their health and health outcomes, while utilizing fewer inpatient services and decreasing the family’s, as well as society’s, costs? In short, increasing healthcare’s value?
Geisinger has consistently pursued the answer to this question.
CHAOS IN U.S. HEALTHCARE
Two factors intersected to set the stage for Geisinger to lead: a chaotic U.S. healthcare environment and our system reeling from a failed merger.
Well before passage of the Patient Protection and Affordable Care Act (ACA) in 2010, U.S. healthcare needed fundamental redesign: the system cost too much, had no wide application of best practice or evidence-based care, and all too often provided care that did not benefit patients.
In addition, under the traditional fee-for-service, payment-by-volume system, healthcare providers actually generated more revenue when patients experienced complications requiring additional care. Most crassly, this was getting as many “heads in beds” and performing as many tests and procedures as possible, regardless of whether they made a difference. In addition, some insurers were reluctant to dive headfirst into payment-for-value, because they were doing so well in the fee-for-service system, particularly as leverage in decreasing payments to providers per unit of work was growing due to insurance company consolidation.
Conversely, a relatively small group of value-driven providers, including Geisinger, was involving patients and families as partners in maintaining health and in obtaining healthcare. Their focus was on wellness and prevention, ensuring that patients received the care they needed when and where they needed it, and on healthcare value, meaning better outcomes and lower cost. The question was whether these interesting and promising models could be scaled and generalized.
Then there were the health policy experts, regulators, and well-meaning government administrators who understood that healthcare needed to change, but carried with their good intent the challenges often present when government intervenes. So Washington took action and passed the ACA, which is essentially health insurance reform. It began to address the need for everyone to have insurance, which is an appropriate and admirable goal, but core issues remain regarding how care is provided and financed. The post-ACA environment continues to be turbulent because of new leadership in Washington, D.C., as well as changing expectations among patients, caregivers, healthcare payers, and taxpayers.
U.S. healthcare’s transformation should include:
• Affordable health insurance coverage for all
• A move to payment for value and outcome, rather than volume
• Best practice, coordinated care
• Continuous innovation
• Patients and their families empowered and active partners with providers in managing health and getting care
TURMOIL WITHIN GEISINGER
Separate from the chaos in the overall healthcare environment in the years leading up to the ACA, we had our own problems at Geisinger. We were among a handful of providers attempting consolidation in the 1990s, along with the predecessors of Partners HealthCare in Boston, Mount Sinai and New York University hospitals and schools of medicine in New York City, and the University of California San Francisco and Stanford University medical schools in the Bay Area. There was tremendous national buzz around these unusual, and largely doomed, marriages.
We had a full-asset merger with Penn State Hershey Medical Center, including the medical school. It did not go well.
The merger was strategically sound, combining Geisinger’s clinical strengths and significant provider and payer market share in rural Pennsylvania with the strong, aspirational medical school culture at Hershey in a good demographic cohort in south central Pennsylvania. But the lack of understanding regarding how to mesh two very different institutional cultures and create a constituent governance led to a dysfunctional three-year marriage. The combined Geisinger–Penn State board had the temerity to make the big bet in the first place and the wisdom to end the merger quickly when the transaction began to blow up.
Our financial condition at the time of the demerger was bleak, caused by a number of factors including no strategic program plan, ill-defined leadership roles, inadequate capital resources, no accountability, no incentives based on accomplishment, and the constriction of clinical delivery resources for a number of years. In addition, our insurance company had only two products: Geisinger Gold, a Medicare HMO product with year-over-year low federal reimbursement increases of 1 to 2 percent, and a commercial HMO offering. Not only were two of the three Geisinger operating businesses (the hospital and clinic) sustaining significant operating losses, the purported success of the third operating business (the insurance company) in fact was due to internal transfer pricing and moving as much of the risk as possible to the providers during the annual budget process.
In addition, Geisinger suffered from institutional post-traumatic stress that dated back even before the merger and accelerated during the three-year dysfunctional marriage, and this went way beyond low morale. A number of excellent clinical leaders at Geisinger, fearing that Hershey would dominate in the merged entity, had left the organization. Numerous clinical training programs either degenerated or were shut down in anticipation of new consolidated programs based in the Hershey Medical School academic departments. The repetitive implementation of inflexible expense management templates also contributed mightily to the institutional malaise.
Personal and group aspirations were slumping in a sort of mediocrity-driven quid pro quo for presumed quality-of-life gains. Some were willing to work for less (not simply money, but also lower group goals) in order to live in a perceived lower-stress, higher-quality-of-life environment.
Although we were structured as a truly vertically integrated system, including the insurance company and all providers in our combined fiduciary, we didn’t function in an integrated way. Instead, the insurance company saw the providers and hospitals as the enemy and vice versa. Each constituency was vocal in its opinion regarding the best way to fix the organization. “Sell the insurance company,” said the doctors. “Get those doctors under control,” said the insurance company leaders.
MOVING FORWARD TO SEIZE THE VALUE SPACE
This environment turned out to be an ideal starting place to reinvent the organization. In such a setting, people are more likely to welcome new ideas and new goals, so it’s easier to introduce and implement a new set of aspirations and, in our case at that time, a new compensation plan.
Strategic discussion focused on determining whether Geisinger would be a local/regional system or whether we could foster national and even international aspirations. While remaining true to our local and regional service area, new leadership at Geisinger saw the opportunity to make a positive difference beyond our traditional geography.
Two critical factors drove much of Geisinger’s commitment to innovate: a RAND study published in the New England Journal of Medicine in 20032 and the data from Arnold Milstein, cofounder of The Leapfrog Group and the Consumer-Purchaser Disclosure Project in the 1980s and ’90s, demonstrating that there was no relationship between the cost of care and quality-of-care outcomes in the United States.3 These were personal epiphanies for Dr. Steele that informed his understanding of how healthcare should be reengineered to unlock a significant amount of value. As CEO, he used these findings as the predicates for all the subsequent acute care and chronic disease management changes that would cascade throughout the organization and create the momentum for doing something at Geisinger that could not easily be done in nonintegrated healthcare systems.
The NEJM article was particularly telling. The researchers looked at prevalent hospital-associated care episodes in different U.S. markets and concluded that almost 45 percent of care was suboptimal, evenly split between too much, too little, and the wrong care.
Geisinger perceived this as a major opportunity. One-sixth of the U.S. economy was healthcare related, and if up to 45 percent of the cost did not bring benefit to those served, or, in fact, may have harmed those served, we could create value simply by extracting some significant amount of this unnecessary or hurtful cost.
Our second belief was an evolution from Dr. Milstein’s thinking that there was no relationship between healthcare cost and quality to an understanding that the relationship between cost and quality actually was inverse. More often than not, patients with the worst outcomes were those whose costs were highest. We were able to define populations of patients who had the worst outcomes based on patients who had the highest costs. Clearly, the table was set to improve care in a cost-effective way.
These two beliefs led to a remarkable convergence in our professionals’ motivation to reengineer care fundamentally. We knew that posing the transformation challenge as a cost-cutting maneuver would not engage our physicians. So instead, we used high cost as a surrogate for poor outcome and focused reengineering efforts on achieving better outcomes for patients, with decreased costs as a collateral benefit. Thus it was professional pride of purpose that energized the Geisinger clinicians.
With the unlocked value from removing useless or hurtful cost in healthcare delivery, we were not simply aspiring to grow into a larger version of a good community hospital; rather, we created a truly integrated healthcare delivery organization committed to healing, teaching the next generation of providers, discovering new knowledge through translational research, and serving patients and the community as a national model for innovation.
Our approach to rebuilding was to develop clinical programs and market share, with the overall mission of improving healthcare value. We would:
• Build more specialty and subspecialty programs and demand, both of which were remarkably absent in the central and northeast Pennsylvania markets
• Solve substantial access issues and stop the leakage of referrals out of Geisinger
• Open the organization’s payer mix to Blue Cross of Northeastern Pennsylvania (now part of Highmark), Capital BlueCross, Coventry Health Care, and Highmark
• Incentivize physicians who wanted to take better care of patients
• Expand the organization’s research and education initiatives through a redeployment of unlocked value
While the alternative of starting our value reengineering projects with less well-led services, such as perinatal care and bariatric surgery, was considered, we chose to identify high-probability early wins that would establish quickly what was possible at Geisinger and eventually could be developed into a national model. We would build momentum by beginning with programs or services that already had excellent clinical leadership and good outcomes prior to reengineering. We settled on coronary artery bypass grafting as our beta test. Success ultimately resulted in the full portfolio of 25 Geisinger ProvenCare Acute, ProvenCare Chronic, and ProvenHealth Navigator programs.
The considerable enthusiasm and excitement around what could be accomplished at Geisinger to enhance healthcare value and help solve the nation’s healthcare challenges aided us in recruiting strong new leaders who surrounded themselves with associates truly motivated to deliver superb care. We attracted highly accomplished physicians from across the country and beyond to come to central and northeast Pennsylvania, in large part because they saw we were being innovative and getting results. Geisinger was viewed as one of the most exceptional models of care in the world due to our reengineering vision and its transaction.
Given the increasingly complex nature of healthcare, we implemented triad leadership partnerships: physician, administrative, and financial leaders working together and accepting joint accountability for a service line or hospital platform’s operational performance, on both the revenue and the expense sides. Leaders conceptualized their areas of responsibility as small businesses and ran them accordingly. This partnership model enabled physicians to lead by practicing great medicine. When you have compelling physician leaders who expertly perform cardiac surgery or manage a complex chronic disease constellation, for example, you want them to continue to have adequate time and energy to care for patients and not be consumed analyzing a P&L statement or human resource policy. But they need to be surrounded by the necessary administrative and financial expertise.
This clear strategy for organizational recovery resulted in sustained operational gains, fueled in large part by our rebuild of the clinical caregiving capacity, the new hospital-based specialty and subspecialty programs, and huge productivity increases for the population care delivered by our community practice service line. Within two years postmerger, the three major businesses were in the black and our financial trajectory was extraordinarily positive. We then began thinking more and more about how innovations at Geisinger could be scalable and generalizable elsewhere. Our health system was well on its way to making a positive difference beyond central and northeast Pennsylvania.
LESSONS LEARNED
• Suboptimal care drives healthcare cost.
• Patients with the worst outcomes usually have the highest costs.
• Removing unnecessary or hurtful care creates value.
• Physician leadership is critical in reengineering care.
• Physician leaders must be respected clinicians and should be surrounded by administrative and financial partners.
• Focusing on providing the best care when and where patients need it drives physician performance.