Administrators, physicians and CEOs are faced with the dual mandate of delivering high-quality outcomes and controlling spiraling costs. This mandate exposes hospitals and health systems to extraordinary financial and operational pressures, particularly now with the Affordable Care Act.

Nowhere is there more pressure than in pediatrics, which has funding and medical care capacity challenges not present in adult systems. Twenty-four months ago, Phoenix Children's Hospital launched a bold initiative to create a first-of-its-kind pediatric clinically integrated organization, or PCIO — a value-based approach to improving care and controlling costs.

Finding a More Flexible Model

Facing a competitive environment and changes resulting from the ACA, community pediatricians in the greater Phoenix area wanted to ensure that physicians were the ones to set standards and make decisions regarding patient care. But meetings with payers made it clear that their focus on the much larger adult population simply wouldn't fit for pediatrics. We needed to tailor our network specifically for pediatrics.

Clinically integrated organizations promote consistent standards for care delivery, quality tracking and reporting, information sharing, and physician collaboration. The benefit to patients and families is the ability to choose a doctor from a network of expert providers who are committed to high-quality, coordinated care that can lead to improved patient outcomes at a lower cost.

Our PCIO concept originated from adult coverage networks that identified key drivers for delivering efficiency, transparency and quality. The design of a clinically integrated organization is based on foundational principles of accountable care organizations, such as improving quality outcomes and focusing on population health management to contain costs. We believed this design was attainable not just at the adult care level, but could be implemented in the pediatric setting as well.
Our rationale for creating a PCIO, as opposed to a pediatric ACO, was that the ACO is a Medicare distribution mechanism with a voluntary collection of hospitals, doctors and other health care providers. These assembled partners work collaboratively to provide coordinated and effective care targeted exclusively at Medicare patients. As an ACO achieves successful outcomes in delivering care quality and cost-containment, the ACO is rewarded with a portion of the accumulated savings it achieves for the Medicare program.

The clinically integrated organization is different from the ACO in that an ACO is limited to a product offering from a contractual perspective, i.e., Medicare. Clinically integrated organizations can operate in multiple platforms, including Medicare, Medicaid and commercial products. This model's flexibility allowed us to provide the best possible care specifically focused on children.

Achieving Capacity and Quality Targets

As we built the infrastructure of our clinically integrated organization, we recognized that 92 percent of all care interactions occur outside the hospital, requiring a proactive approach to patient care. Our PCIO, the Phoenix Children's Care Network, is a collaborative and integrated system of care encompassing general pediatricians, pediatric specialists and sites of service, including Phoenix Children's Hospital and the hospital-owned urgent care and surgery centers. The PCCN is governed by physicians, the majority of whom are independent.

Leaders of the PCCN built its quality, safety and transparency standards specifically for the pediatric population. The PCCN's board and network partners have defined clinically significant metrics by which physicians and other partners in our network are measured. To date, this integrated and collaborative team has approved 14 initial primary care measures for PCCN physicians, with 34 metrics already identified to evaluate performance of our pediatric specialists.

The PCCN's quality committee also identified three targets: attention-deficit/hyperactivity disorders, asthma and preventive services. Committee members are developing evidence-based, standardized clinical protocols to reduce variation and improve care.

The PCCN has grown considerably since its launch and now includes more than 800 providers — approximately half of all general pediatricians in the region and the majority of pediatric subspecialists. The PCIO model works most effectively when the network of providers covers the largest number of pediatric specialties and incorporates the greatest number of independent physicians.

Learning from Our Experience

From the perspective of a PCIO, but also from the broader vantage point of a managed care arrangement, some important lessons can be discerned from our journey.

  • In these challenging two years, we've learned that a clinically integrated organization for pediatric care must be structured to address the specific operational and financial challenges facing pediatrics.
  • Operational benefits of the clinically integrated organization include a better communication platform for partners to collaborate and achieve benchmarked quality results.
  • Providers want to deliver the best care. Our members set high standards for quality and outcomes. They are fully invested in better care because they established the metrics. Therefore, we believe they should share in the cost savings realized from these improvements.
  • The effectiveness of our PCIO model depends on a value-based contracting proposition in contrast to the traditional fee-for-service model. The formula is based on an incentive framework: compensation depends on valuation of effective and high-quality outcomes, not on procedures and volume.
  • The investment in information technology infrastructure is significant yet essential. Our holistic IT systems enable effective care coordination, measure quality achievement, and improve communication across the continuum of care.

Transformative Solutions

We believe the development of the PCIO model was unique to our market, as the PCCN has evolved our organization from Arizona's only licensed, freestanding children's hospital to a pediatric health care delivery system. In embracing this approach, we understood that the medical community would monitor and take note of our performance, missteps and successes.

At Phoenix Children's Hospital, our leaders fully expect that the model adopted by PCCN, and PCIOs in general, will become more common over the next several years, as traditional fee-for-service payment will be phased out in favor of a value-based system. Also important to PCIO development is continued integration between networks of clinically integrated organizations, which will provide operational efficiencies, cost-effectiveness and consistently high-quality care to more Americans.

There are great changes in store for adult and pediatric medical care. Innovative practices and models such as our PCCN provide transformative solutions for the health care community and the patients they serve.

Robert Meyer is the president and CEO of Phoenix Children's Hospital.