Hospitals are using a variety of strategies to cut costs while improving care quality in their service lines. Some take a well-defined approach, such as clinical co-management, in which service line governance is shared and physicians get a management fee and are eligible for bonuses tied to performance. Other hospitals use structures specific to their own institutions. Others use a mixture of methods.

No matter the model, the goal is the same — to use evidence-based medicine to create metrics, protocols and care pathways that reduce unwanted variations in care and improve patients’ experiences and outcomes. That work, in turn, lowers costs by reducing lengths of stay, decreasing complication rates and cutting readmission rates. The end result is value, which opens the door to participating in new payment models, such as accountable care organizations, global pricing and payment bundling, and to competing on price for the growing ranks of consumers with high-deductible health plans, says Robert A. Minkin, senior vice president at the Camden Group.

“Once you’ve put a lot of time, effort and money into the development of a better product, a better service for patients, how would you now take it to market and make it more of a strategic advantage?” Minkin asks. “For some, often the answer is a bundle of some kind with either Medicare or a commercial payer. But you can’t go out and sell something you don’t have — or you shouldn’t because you’d lose tons of money by trying to capture market share without a value proposition.”

Although each hospital’s approach to guiding its service lines through the necessary task of redesigning care to improve quality and lower costs is different, they share some fundamental elements. They include creation of shared physician and hospital goals, performance measurement, physician involvement in decision-making, and payment of physicians for their time spent on improving value in their respective clinical service lines.

Framing the issue:

New health care payment models, along with price sensitivity among the growing number of people in high-deductible health plans, are pushing hospitals to strive for value in their service lines.

Unnecessary variations in care could account for about 30 percent of health care spending by some estimates.

Hospitals and health systems are scrutinizing management of their service lines. The goal is to use evidence-based medicine to weed out unnecessary variation to improve care quality, patient experience and to lessen the cost of care.

The concept of getting to value is generating a lot of buzz in health care. But the way to reach that goal — service line management — remains very much behind the scenes.

Certain services lend themselves more easily to value management because they have comprehensive quality metrics and providers have experience using them, and because they represent a large portion of health care spending. These services include cardiovascular surgery, interventional cardiology, orthopedics, stroke and some cancers.

But hospitals should strive for value in all service lines. “It’s like being a little bit pregnant,” Minkin says. “You can’t just say cardiac and ortho are the places I’m going to pay a lot of attention to. There are women’s services and the whole general surgery space. Once you’ve started down this pathway, this payment methodology should migrate into all of your key clinical spaces to differentiate you with payers.”

‘A party package of resources’

Allina Health, a 12-hospital system based in Minnesota, is using a patient-centered, clinician-driven approach to manage its eight clinical service lines, with a ninth planned for 2015.

The goal is to provide “reliable, evidence-based, continuum-based care that is of high value,” says Christine Bent, senior vice president, clinical service lines. “The idea is that, for anyone who enters our system, their outcome doesn’t vary based on geography.”

Bent and Allina President and Chief Clinical Officer Penny Wheeler, M.D., oversee the entire service line structure as a team. Each of the service lines is managed across the system by a steering committee that reports monthly to Bent and Wheeler.

Within each service line are several multidisciplinary program committees chaired by doctors and organized by medical condition across all locations that offer treatment for a particular condition. For example, the cancer service line includes program committees for breast, colon and lung cancer. Allina uses a similar approach for hospital-based services, such as critical care and emergency medicine.

The system’s database identifies where clinical variation exists, and that information is shared with physicians through the program committee structure. The committees, which either include a patient member or they obtain patient input, then evaluate the evidence, make and test changes, and adopt consensus care guidelines that are spread across the system so that all clinicians offering that type of care provide it consistently.

One example of this approach is an enhanced colorectal surgery recovery program. The initiative was launched at one hospital, where it decreased the average length of stay for patients undergoing elective colorectal resection from 6.6 days to 5 days without increasing readmissions. The project now is being disseminated systemwide, Bent says.

Allina offers what Bent calls a “party package of resources” to support the program committees. Those resources include help from data analysts, performance improvement experts, a data architect and a pharmacy representative, depending on need.

The data architect helps the committees to create scorecards that present data to clinicians in a meaningful way. The scorecards include performance data on quality, financial and patient experience goals. “If you share the data with physicians, they want to do the right thing,” Bent says. “They’re pretty competitive, so sharing the data typically gets us a long way toward our goals.”

If unnecessary variation continues, the issue is addressed through focused conversations with the medical staff leadership at the hospital or even with a particular physician. “It’s not a punitive discussion,” Bent says. “If you keep the patient at the center of all of these conversations, it allows you to move the work forward.”

Allina physicians are a mixture of employed and independent doctors. Some of the independent practices have formal co-management agreements with the system and some don’t. The service line management approach works regardless, Bent says.

For example, three competing, independent radiology groups participate in the breast cancer program committee. “They help to achieve consensus on things that sometimes, honestly, take money out of their pockets because often we end up doing fewer procedures,” Bent says. Meanwhile, Minnesota Oncology, an independent group, has a formal co-management arrangement with Allina, while the radiology and pathology groups don’t. Instead, the radiology and pathology leaders get paid for their time away from practice spent on cancer program committees.

“We have lots of different ways we connect with physicians,” she says. “The key for us is getting the best people around the table. We meet them where they’re at.”

The service line management strategy has resulted in a number of scripted workflows that reduce variation in care and cost. As a result, Allina has been able to establish what it calls its brand promise and to leverage it to attract patients.

Nowhere is that philosophy more apparent than in the cancer service line, where Allina has a formal process for use of the Virginia Piper Cancer Institute brand name. To get the designation, a hospital has to apply, present its case to the service line’s steering committee, and meet specific criteria. Hospitals that have achieved the designation have seen patient volume increase up to 20 percent, Bent notes.

“We want to measure better outcomes for more patients,” she says. “The idea is not more patients in the traditional sense where we do more PET scans just to do them but, rather, by providing the right care for the right patient in the right location, more patients will want to come into our system.”

Getting a better handle on cost and patient outcomes for certain services helps the system to prepare for bundled payment for those services. “We’d go in eyes wide open where the opportunity exists,” Bent says.

So far, the opportunity for bundled payment doesn’t exist yet with private insurers in Allina’s market, but the system is starting to talk with some payers about a concept for joint replacement. “We’re trying to meet them at the pace they’re driving this and that their administrative capabilities allow,” Bent says.

In the meantime, the system is keeping an eye on the impact that creating value for payers and patients is having on its margins “because the reality is [that] we do live in a predominantly fee-for-service world today,” she says.

The co-management approach

At Lee Memorial Health System in Florida, officials have turned to clinical co-management agreements to improve service line management. The approach emerged out of an effort to implement matrix pricing for orthopedic implants. The initiative highlighted a gap between physician and system priorities, explains Kevin Newingham, vice president, strategic services. The four-hospital system wanted to rein in costs because the implants themselves ate up most of the hospital reimbursement for such procedures. But orthopedic surgeons were mostly unaware of the variations in implant cost and utilization and were using their vendors of choice.

Not only did the system and the physicians lack shared goals, but the eight competing orthopedic surgery practices lacked the alignment on care delivery that health care reform requires, notes Alex Greenwood, service line director of orthopedics.

A series of meetings resulted in the system and practices agreeing that co-management was the best approach to align physician and hospital goals and to give physicians a voice in the decisions that affect their daily lives, Newingham says. Since the orthopedics co-management arrangement began in October 2010, Lee Memorial has instituted similar agreements in cardiology and at its outpatient surgery center, and is considering the approach in neurology.

The co-management agreements span the system and are overseen by joint operations committees, which are co-led by physicians and an administrative leader. Each hospital has its own service line quality council tasked with carrying out systemwide projects at the local level.

Lee Memorial uses data to compare its performance to national benchmarks and identify opportunities for improvement. The service lines use that information to develop goals that matter to both the system and physicians. Orthopedic initiatives have included improving Surgical Care Improvement Project measure compliance, instituting total joint replacement protocols, and developing fragility fracture treatment protocols and order sets.

Greenwood points to the system’s fragility fracture program as illustrative of the process. Data showed that care for elderly patients with hip fractures varied between hospitals and between physicians. The protocols, aimed at returning patients to independent living as soon as possible, were developed at Lee Memorial Hospital in 2012 and have been adopted at the system’s two other hospitals providing orthopedic care. The initiative has reduced the fragility fracture readmission rate and shaved 1.5 days off the average length of stay, Greenwood notes.

Even given the system’s and physicians’ openness to clinical co-management, there were growing pains along the way. “It took about a year to build trust, to really start speaking the same language, and to start to see a tangible benefit of the collaboration,” Greenwood says.

The team relationship that co-management has fostered has made physicians more attuned to hospital needs. Physicians have worked to improve medical necessity documentation and are helping the organization with meaningful use and ICD-10 preparation.

Both physicians and the system are interested in pursuing bundled payment arrangements for joint replacement. Private payers in the market aren’t ready for it yet, but the system plans to participate in a Medicare bundled payment initiative in the spring. That experience could give the organization a success story to take to private payers, Greenwood says.

Cut variation, boost experience

To collaborate more closely with its physicians, Ridgeview Medical Center, Waconia, Minn., restructured in 2003 by organizing around service lines. Each of its eight service lines is managed by an administrative lead who partners with at least one physician. Representatives from each line serve on the medical staff executive committee.

Every year, the service line administrative and physician leaders review organizational goals and other data, including quality performance, patient experience scores, market share and financials, and use the information to draft work plans, explains Pat Michaelson, R.N., vice president for patient care and chief nursing officer.

Unlike a formal co-management arrangement, Ridgeview’s approach does not include a management fee nor performance bonuses. Instead, physicians who engage in service line work are paid an hourly stipend to compensate for time spent away from their practices.

Giving physicians a voice in service line management has made doctors, particularly those in independent practice, more willing to engage in quality and efficiency projects. For example, the three competing obstetric groups, two of which are independent, are working together to reduce inductions at fewer than 39 weeks’ gestation, notes Michael Phelps, Ridge- view’s chief operating officer.

The service lines’ focus on implementing evidence-based practices results in less variation in care, and that means improved processes for staff and consistency for patients and their families. Quality improvement translates not only into better care, but also reduced readmission rates and lengths of stay.

Ridgeview hasn’t had a problem finding physicians willing to put in the service line management time, Michaelson says.They are asked for a two-year commitment as service line champions, but some have stayed for nine years now. “They see better outcomes, better patient experience and more cost-effective care,” she says. Geri Aston is a contributing writer to H&HN. 



Executive Corner

Robert A. Minkin, senior vice president at the Camden Group consulting firm, offers advice on service-line management.

Create a dyad leadership structure.

A lead physician and a lead administrator team up on physician integration and service-line optimization across multiple locations if it’s a health system. For co-management and bundled payment arrangements, “there must be some kind of physician oversight and governance to these entities,” Minkin says.“If that doesn’t exist, they fail almost every single time.”

Be transparent with physicians about quality and cost data.

“There is a fear that if I show them how much money we make in a particular area, they’re going to want more of it,” Minkin says. “Even though your orthopedics, cancer and cardiac programs are where you might make money to pay for all the other services that don’t, you’ve got to share all of this with the physicians.” Use education to manage physician expectations about what they really ought to get out of a co-management or bundled payment arrangement.

Understand performance per physician.

Who’s making the hospital money and who’s not, who’s hitting the average length of stay and who’s not, what is the supply cost per case, and overall cost per case? Compare that to your internal best practice. “If nothing else, just get to your internal best practice. If you achieve that, you’ll save 25–40 percent of costs. That’s how much variation there is in some of these cases,” Minkin says.

Conduct an objective review of the service line.

Use results to prioritize shared goals. The assessment should compare patient experience, cost and quality with best in class. “Key are physicians’ perceptions of how the organization is functioning today and what they think it needs to achieve to make it a more productive and better-quality operation,” Minkin says. 



Bundling in Medicare

The Center for Medicare & Medicaid Innovation is running four initiatives testing bundled payment for episodes of care. A fifth project is in the works.

Model 1 Retrospective Acute Care Hospital Stay

The episode of care is the inpatient stay in the acute care hospital. Medicare pays the hospital a discounted amount based on Inpatient Prospective Payment System rates. Medicare continues to pay physicians separately for their services.

Model 2 Retrospective Acute and Post-acute Care Episode

The episode of care includes the inpatient stay in the acute care hospital and all related services during the episode, which ends either 30, 60 or 90 days after hospital discharge. Participants can select up to 48 different clinical condition episodes.

Model 3 Retrospective Post-acute Care

The episode is triggered by an acute care hospital stay and begins at initiation of post-acute care services with a participating skilled nursing facility, inpatient rehabilitation facility, long-term care hospital or home health agency.

Model 4 Prospective Acute Care Hospital Stay

Medicare makes a single, prospectively determined bundled payment to the hospital that encompasses all services furnished during the inpatient stay by the hospital, physicians and other practitioners. Physicians and other practitioners submit “no-pay” claims to Medicare and are paid by the hospital out of the bundled payment. Related readmissions for 30 days after hospital discharge are included in bundle.

FUTURE Model Specialty Practitioner Payment Model

Medicare is interested in testing new models of care that would focus on specific diseases, patient populations, and specialty practitioners other than oncologists in the outpatient setting. The payment structure could include procedural episode-based payment, episode-based payment for complex and chronic disease management, or other innovative arrangements. A potential oncology model is on a separate development track.