Framing the issue:

  • Norwegian American Hospital serves a mostly poor Hispanic neighborhood in Chicago.
  • When the new CEO arrived three and a half years ago, its infrastructure was crumbling, its Joint Commission accreditation was in peril, and its finances were a mess.
  • Since then, executives have plotted a methodical turnaround plan that has moved the hospital into the black, improved facilities and quality of care, and impressed community leaders and residents alike.

In October 2010, José R. Sánchez arrived in his new post as president and CEO of Norwegian American Hospital on Chicago's northwest side. He had left a prestigious job running a network of the New York City Health and Hospitals Corp. to take on the unenviable task of turning around a small stand-alone, safety net hospital on the verge of losing Joint Commission accreditation over chronic safety and cleanliness problems — not to mention being under scrutiny by Medicare for several years of life safety issues and having a 116-year-old physical plant, poor relationships with physicians, zero electronic records, a huge Medicaid and uninsured patient population and a flow of red ink. An interim management company had led the hospital for four years, running through $14 million of hospital cash.

"The picture would have been pretty scary for anyone," says Sánchez, now 60, who had been credited with saving two safety net hospitals in New York. "You needed to be brave to say, 'Let me go over and take charge of Norwegian American Hospital.' I was the right age and the right stage of my career to be interested in taking a risk like this, but it was a big risk, believe me."

Fast-forward exactly three years to last fall and the Cathedral Hall of the venerable University Club of Chicago on the city's lakefront, where the hospital hosted a national symposium on patient safety and quality of care in the urban safety net environment. "Symposia like this happen all the time, but even two years ago it would have been unthinkable for our hospital to even consider holding such an event," says Abha Agrawal, M.D., who was recruited by Sánchez to lead operations and clinical quality at Norwegian from a post as chief medical officer of Kings County Hospital Center in New York City. At the symposium, Agrawal brought along copies of a new reference book, Patient Safety: A Case-Based Comprehensive Guide, which she had edited.

Fixing the fundamentals

Sánchez and Agrawal have carried off a startling transformation of the 200-bed Norwegian, housed in a red brick facility nestled in the Humboldt Park neighborhood, a largely low-income, Hispanic community. The dirt and peeling paint has been cleaned up, and state health inspections find no lingering problems. Much of the aging equipment has been replaced, itself a miracle. Not long ago, Rick Ahuja, M.D., an attending ophthalmologist, chipped in with fellow eye docs to buy ophthalmoscopes, eye drops, even imaging equipment.

Right after he arrived, Sánchez found out the state of Illinois, which has had the nation's worst budget deficits, planned to cut $2.6 billion from Medicaid, the source of 63 percent of Norwegian's revenue. "My first job was not really to be a CEO, but to be a community organizer," he says. "We bused people from Humboldt Park to the state Capitol to lobby for an exemption for safety net hospitals. We were the leaders for these hospitals, and we made our mark. The safety nets were made whole."

Through a methodical process, Sánchez and Agrawal have led an effort to turn around the rest of the hospital's finances. The strategy behind the revival has been to improve quality and patient safety so people no longer fear coming to the hospital, build new bridges to the community to improve patient volume and turn an organization focused only on inpatient acute care into a network encompassing the full continuum of care. The hospital invested $5 million in an electronic health record system, recouping almost all of it by attesting for meaningful use under the federal incentive program.

Volume on the rise

The early results are promising. After losing $4.5 million in 2010–2011, the hospital had net operating income of $800,000 the next year and was $1.2 million in the black in 2013. This improvement in the bottom line was a result of intensive efforts to reduce costs and improve efficiency. The savings were reinvested in expanding new programs such as behavioral health, and enhancing existing programs. The emergency department — the source of 60 percent of hospital admissions — has seen an 8 percent spike in visits to nearly 28,000 last year.

"It's really a night-and-day change," Ahuja says. "The rooms have been updated, the lighting improved, the place is consistently clean. The physicians are using the EHR, and there is a sense of being part of something."

After spending seven years on Medicare and Joint Commission watch lists over poor quality, in the second quarter of 2013, the hospital achieved 100 percent compliance on almost all national core measures of quality. In the first half of 2013, it had no cases of ventilator-associated pneumonia, central line-associated bloodstream infection or surgical-site infection.

Norwegian also went from the doghouse to the penthouse of the Leapfrog Group's quality assessment, outscoring the national average across all three composite scores of quality, resource use and value that Leapfrog assigns to hospitals.

Despite these achievements, Norwegian's effort to remain a viable stand-alone organization is entering a perilous phase. All safety net hospitals fear the net effect of a series of unintended consequences resulting from health reform, including $40 billion in cuts to the Medicare and Medicaid Disproportionate Share Hospital programs, which provide supplemental funding to hospitals that treat large numbers of uninsured and vulnerable populations. Those changes are mirrored in Illinois' continuing efforts to reduce the cost and improve the quality of services delivered to Medicaid beneficiaries.

Challenges from reform

"Here we are on the cusp of coverage expansion, both in terms of new Medicaid eligibility in states that have chosen to expand coverage and in newly covered enrollees through the health exchanges and, yet, we are also potentially on the cusp of seeing some pretty large financial challenges for urban hospitals that treat vulnerable populations," says Beth Feldpush, vice president for policy and advocacy at America's Essential Hospitals, formerly the National Association of Public Hospitals and Health Systems. "There are going to be some pretty tough choices where many of these hospitals are going to have to cut back on services."

Safety net hospitals represent 2 percent of acute care hospitals nationally, but provide 20 percent of all hospital-based charitable care, the association has found. In 2010, safety net hospitals' margins averaged 2.3 percent, while the average among all hospitals was 7.2 percent. Take away the DSH funding and other supplemental funds from a hospital assessment tax that also is being trimmed, and the average safety net hospital's margin plummets to minus 6 percent.

In Illinois, one of the states to expand Medicaid, there is certainly opportunity. Studies by the Urban Institute and the Center on Budget and Policy Priorities estimate that 573,000 adults in the state may gain coverage for the first time. The Affordable Care Act includes increased reimbursement for primary care services, to the level of Medicare reimbursement rates, although this increase will expire at the end of 2014. Another $40 billion has been allocated to expanding community health clinics.

And yet, the gains in insured patients would not come close to offsetting losses in supplemental payments, safety net hospitals say, because they expect to shoulder a disproportionate load in caring for people who will remain without insurance even after the law is implemented, including millions of undocumented immigrants. The disastrous rollout of the federal marketplace health coverage has further tested the notion that reform will help rather than hurt safety nets.

At Norwegian, about 20 percent of patients lack coverage and many of those are undocumented. Supplemental payments accounted for about $30 million of its $96 million net revenue for its fiscal year ending Sept. 30, 2013.

The uninsured still an issue

The DSH cuts have been held off for now, as the state analyzes the potential impact on safety nets, but losing any of that support would be a significant problem, Sánchez says. "Medicaid and the exchanges may take three years to roll out, but the DSH cuts are now. We feel Obamacare is not going to solve the problem of the uninsured. They still are going to show up in our ED, and we must by law give them great care, and we do. But we need to be made whole."

Illinois, meanwhile, is rushing to fulfill its own law, which mandates that half of all Medicaid beneficiaries be in some form of managed care program by Jan. 1, 2015. That goal may help Norwegian in its own mission to provide services across the continuum of care.

The hospital has taken the lead on an application to become one of the new Illinois Accountable Care Entities, or ACEs, which mirror federal accountable care organizations but will serve the Medicaid population. The proposed Accountable Care Chicago ACE would have an emphasis on primary care; coordination of all care, including behavioral, social and public health services; and accountability for population health outcomes.

The ACE proposal includes Norwegian, Mercy Hospital & Medical Center, Swedish Covenant Hospital, a behavioral health provider and seven federally qualified health centers. As with the federal ACOs, there will be shared risk and shared savings through better-coordinated care, transitioning to full capitation for 40,000 enrollees initially, rising from there as capacity allows.

"We have three years to get this right," Sánchez notes. "If we don't, we're in trouble."

Building a continuum of care

This new alliance with other providers is part of the hospital's master plan. Already, it has strengthened ties to the Hispanic community, in part through support of a diabetes program; opened a new health clinic in partnership with a local megachurch led by a charismatic Hispanic pastor; strengthened ties to five federally qualified health centers; and strengthened relationships with providers across the continuum of care, including area nursing homes and a home health agency.

"We know the direction health care is going; it is all about value, using care coordination to reduce the cost and improve the quality of care nationally, at the state level and locally," Agrawal says. "We know we have to move away from the focus on our acute care hospital and toward the continuum of care. So, from the patient's home to the primary care doctor to the hospital to post-acute care, we need Norwegian to be at the hub of all of it from both patient and business perspectives as we position ourselves for the health care market of the 21st century."

Community involvement is also a significant piece of the puzzle. It has helped that Sánchez, a native of Puerto Rico, is Norwegian's first Latino CEO. "I think that the solution to the health care problem is not to be found just within the medical establishment, but also within the communities it serves, taking charge to improve the quality of life," Sánchez says.

The man in charge of those relationships is Michael Curran, a longtime resident of the area who had worked briefly as a consultant to Norwegian prior to Sánchez's arrival, but returned full time last June. He has been working with the New Life Covenant Church on a co-branded clinic in the heart of Humboldt Park. "The church has a lot of healing services, such as HIV counseling. We wanted to integrate some of the services the church has with some of the clinical services we can offer," Curran says. "We will start with primary care services and expand into selected specialty services depending upon the needs of the community and consistent with the mission of the church."

The clinic would never have happened without Sánchez's dogged outreach to community leaders, says the Rev. Wilfredo De Jesús, the pastor of the 17,000-member New Life church, who was named one of Time magazine's 100 most influential people in the world in 2013. "Before José, the hospital had an image problem. It was like an island, a waste of land and facilities, because it wasn't being cared for, and the feeling was you go in there and you might not survive the experience. José understood that before you can fix something, you must understand how it got broken. He listened, he responded, and he revived the hospital almost from the dead."

Perhaps the best evidence of a revived hospital is to be found in HopeFest, the largest back-to-school event in Chicago, held annually in the area. For years, Norwegian had nothing to do with it, but now hosts the event on its campus. "You can just see in the look on people's faces that they were looking at Norwegian differently because they are now investors in the lives of people in the community."

The community outreach includes the groundbreaking Greater Humboldt Park Diabetes Empowerment Center, a community-led effort to reduce an epidemic of diabetes in the area, which runs three times the citywide average. The program provides education on the disease, exercise programs and community outreach to link residents to primary care. A recent diabetes screening day drew more than 100 people. Many took advantage of a nutrition educational session using a demonstration kitchen donated by Norwegian American.

"You would never have had this involvement under the prior administration," says Jaime Delgado, a longtime activist against health care disparities in Chicago, who led the effort to start the center. "José has really built ties to this community. It is not just about being Latino, but about knowing that you must be involved every day as a community leader."

As he looks forward, Sánchez knows that the ever-shifting environment in which his hospital works means he must be flexible, but he remains fixed on his idea of keeping his small safety net community hospital viable.

One big issue is his aging facility. He wants to attract patients from gentrifying areas nearby. For that, he knows he needs a new hospital building. "Most of our rooms aren't private. Forget about payer mix; think about respect for patients. How can you improve patient experience in that situation?"

With current finances, a new, smaller building with all the amenities is out of the question, so he needs alliances. Although he acknowledges, "everything is on the table," he sees other avenues. "Everyone's talking about mergers and acquisitions, that you have to be part of a bigger system to survive. There has to be another model that is consistent with reform and with community needs."

Todd Sloane is a freelance writer in Highland Park, Ill.

Executive Corner

Building a culture of safety has been at the forefront of Norwegian American Hospital's effort to reinvent itself. The organization has become data-driven with the recruitment of new leadership and has engaged all staff, including physicians and the board of trustees, to ensure that quality and safety measures are being practiced. It has hardwired quality improvement practices by:

Establishing a quality governance structure that created infrastructure, alignment and transparency across committees that ultimately report to the hospital's board of trustees

Enhancing departmental dashboards to include targets and benchmarks that are aligned with national quality indicators

Developing departmental action plans that include systematic measurement (i.e., audits) and the opportunity for feedback and refinement to ensure continuous quality improvement

Standardizing processes to reduce variation in patient care

Doing hourly rounding by nurses and senior leadership

Holding daily leadership huddles and unit safety huddles

Engaging medical staff in quality improvement, holding monthly physician meetings on patient safety and continuing medical education seminars on reform