As IB noted in Part I of this Take Five interview with Meriter’s James Woodward, the Affordable Care Act has resulted in a strong wave of consolidation in the health care industry, including the pending affiliation agreement between UnityPoint Health of West Des Moines, Iowa, and Meriter Health Services of Madison.
In Part I, Woodward forecast growth for Meriter under this new affiliation, and in Part II he explains why so many freestanding hospitals are eager to partner with larger health systems, and what that means for health care consumers.
IB: Health care providers increasingly view population health management as a justification to collaborate. Many believe the cost pressures in the ACA practically demand that evidence-based preventive health services are practiced across a wider swath of people. How does this affiliation impact your approach to that?
Woodward: Two things that we do not have, and we would not have the resources or the expertise to build on our own as a freestanding community hospital, are an accountable care organization and, secondly, a robust infrastructure around population health management. They [UnityPoint Health] have both. As I said, they have an accountable care organization that is quite large. It covers most of their regions, if not all their regions, and it’s one of the largest in the country. It is actually active. A lot of organizations have built ACOs, and they’ve not really done a whole lot. That’s the case, I think, in our local market. We would never have the financial resources to apply them appropriately to building an accountable care organization here, so now we can tap into what they have done, and done very effectively.
| “We’re seeing the most watershed change in health care delivery since the formation of Medicare and Medicaid, so this is a huge undertaking in our industry.” — James Woodward, president and CEO, Meriter Health Services |
Secondly, we have no resources whatsoever here, at Meriter, around population health management. What we’ve done is more of the exploration and the research, and that’s using our existing staff to look at how we want to better utilize population health management. We do not have the bench strength or depth of staff to do that on our own. They have a whole area that deals with this, UnityPoint Health, within their entire system.
The other thing is that they, through the accountable care organization, have been able to pull up a lot of data on use rates, which better informs how you deliver care, how you manage the population of a group of patients in terms of improving their health. With PPIC [Physicians Plus Insurance Corp.] coming into the fold, they are going to have claims data that they can throw into that mix as well. So they are going to have a very rich, robust database that is going to inform them about how best to manage the health and well-being of large populations of patients, not only in south central Wisconsin but in each of their markets. So we view that as a fantastic marriage that is bringing a lot of value to Meriter that we otherwise would never to be able to do on our own.
IB: Assuming they get the healthcare.gov website working, at some point is it in the plans of Physicians Plus to have a variety of offerings on the exchange?
Woodward: At this point in time, we are planning to participate in the exchanges. As you’ve indicated, that’s a bit of a loaded issue right now. Everybody is taking more of a wait-and-see approach to see how things shake out, but beginning with the closing of our affiliation with UnityPoint, the plan is for Physicians Plus Insurance Corp. to transition to the corporate office of UnityPoint Health so that it can be deployed across their different markets, not just in south central Wisconsin. Meriter will still be an active participant in that. We’ll still have four members of our board, of the insurance plan, etc.
From our standpoint, a lot of what the strategy will be for Physicians Plus Insurance Corp., when it moves to corporate, will be determined in large part by that new board and by UnityPoint. So for the time being, we’re taking a wait-and-see approach and expect that in January of next year, that transition will occur and we’ll be off to the races with a little bit more clearly defined strategy. We just don’t have that detail yet.
Physicians Plus is not physically moving [out of Madison]. It’s going to stay at its current location over off Rimrock Road, and the staff will remain in place. There will likely be more additions to management than what we have today, as they expand into other markets. I would not be surprised, and I would not rule out — I can’t say this for certain — it would not surprise me if there were satellite offices for PPIC in some of the other markets that are important to UnityPoint Health.
(Continued)
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IB: Given how the ACA is written and how regulators are writing the rules, health care organizations appear to believe their very survival is at stake. Can you offer an explanation to consumers of health care as to why the ACA has caused so much industry consolidation and why they should view it as beneficial for care delivery?
Woodward: We’re seeing, as a result of the Affordable Care Act, which I believe is a necessary step in the right direction, but it’s imperfect, is that we’re seeing the most watershed change in health care delivery since the formation of Medicare and Medicaid. So this is a huge undertaking in our industry. The key principles behind it are that we are going to be incentivized as health care providers to keep patients well and to keep them out of the hospital and to keep them from using excessive health care resources. That’s the antithesis of how we’ve operated historically for the last however many decades. We’ve always been incented that the more patients we see, the fuller our hospitals are, and the more tests that are performed, the more we are reimbursed and the better we do financially.
I’m not saying there is an ulterior motive, I’m just saying that’s the way the system has always been developed. It’s fortunate that we’re seeing a very significant change where we’re going to be incentivized to care for populations of patients, and if we keep them well and we avoid the excessive use of hospital services, emergency rooms, and the like, then we are going to be compensated better. So the better the outcome of the care we provide, and the healthier the patient, the better we’ll be reimbursed. If our patients aren’t well and they are very sick, and they are big users of health care, the less reimbursed we will be.
What hospitals are very worried about is that, number one, you need large populations of patients to make this work. That’s why hospitals are consolidating so that they can collapse these pools of patients into larger groups. Secondly, the cost of caring for these groups of patients is increasing, not decreasing. So the more economies of scale that we can achieve, the better. In some surveys, north of 75% of community hospitals like Meriter are either in the process of joining a larger system or seriously contemplating it. It was our belief that we needed to be part of a larger system to get those economies of scale, to operate more efficiently, to reduce our cost of operating, and to be able to manage care for large groups of populations more effectively than we could on or own, with a more limited pool of patients and a more limited pool of data to support it. So the hospitals are looking to join bigger systems for those reasons.
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