Your Hospitals Path Second Curve

Your Hospitals Path
to the Second Curve:

Integration and Transformation
January 2014
Answer Top
Strategic Questions
Implement Must-Do
Strategies and Master
Organizational Capabilities
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Your Hospitals Path to the Second Curve 1
James H. Hinton
Committee Chair
President and Chief Executive Officer
Presbyterian Healthcare Services
Rhonda Anderson, DNSc, FACHE
Chief Executive Officer
Cardon Childrens Medical Center
Thomas L. Bell
Kansas Hospital Association
Art Blank
Mount Desert Island Hospital
Mary Blunt
Corporate Vice President
Sentara Healthcare
Pamela S. Brier
Maimonides Medical Center
Laura Caramanica, PhD, FACHE
Chief Nursing Officer
WellStar Kennestone Hospital
Lawrence P. Casalino, MD, PhD
Chief, Division of Outcomes and
Effectiveness Research,
Department of Public Health
Weill Cornell Medical College
Michael Chernew, PhD
Professor, Department of
Health Care Policy
Harvard Medical School
Douglas A. Conrad, PhD
Professor, Department of
Health Services
University of Washington
Elaine Couture, MBA, RN
Providence Sacred Heart Medical Center
Daniel L. Gross, RN, DNSc
Executive Vice President
Sharp Healthcare
Raymond T. Hino, MPA, FACHE
Interim Chief Executive Officer
Bear Valley Community Hospital
Donna M. Katen-Bahensky
University of Wisconsin
Hospitals and Clinics
Mary J. Kitchell
Trustee
Mary Greeley Medical Center
Stephen Love
President
Dallas-Fort Worth Hospital Council
T.R. Reid
Author
Michael G. Rock, MD
Chief Medical Officer
Mayo Clinic Hospitals/Mayo Foundation
John J. Singerling III, FACHE
President
Palmetto Health
Joseph R. Swedish, FACHE
WellPoint, Inc.
Warner L. Thomas
Ochsner Health System
David P. Tilton
AtlantiCare
Richard J. Umbdenstock
American Hospital Association
Lorrie Warner
Managing Director
Citigroup Global Markets, Inc.
Maryjane Wurth
President
Illinois Hospital Association
American Hospital Association
2013 Committee on Research
Suggested Citation:
American Hospital Association, Committee on Research. (2014, January). Your hospitals path to the second curve:
Integration and transformation. Chicago, IL: Health Research & Educational Trust.
For Additional Information:
Maulik S. Joshi, DrPH, (312) 422-2622, [email protected]
Accessible at: http://www.aha.org/paths-to-second-curve
2014 Health Research & Educational Trust. All rights reserved. All materials contained in this publication are
available to anyone for download on www.aha.org, www.hret.org, or www.hpoe.org for personal, non-commercial
use only. No part of this publication may be reproduced and distributed in any form without permission of the
publication, or in the case of third party materials, the owner of that content, except in the case of brief quotations
followed by the above suggested citation. To request permission to reproduce any of these materials, please email
[email protected].
2 Your Hospitals Path to the Second Curve
Acknowledgments
The AHA Committee on Research would like to acknowledge the following organizations and individuals
for their invaluable assistance and contributions to the committees work:
William Chin, MD, Executive Medical Director, HealthCare Partners, LLC
Michael Englehart, President, Advocate Physician Partners
Kylanne Green, President and CEO, URAC
Leeba Lessin, President and CEO, CareMore Health System
William Shrank, MD, MSHS, Former Director, Rapid-Cycle Evaluation Group, Centers for Medicare &
Medicaid Services/Center for Medicare & Medicaid Innovation
Rhoby Tio, MPPA, Program Manager, Hospitals in Pursuit of Excellence, Health Research &
Educational Trust
Table of Contents
Executive Summary...........................................................................................................................................................4
Introduction........................................................................................................................................................................6
Defining Integrated Delivery Systems............................................................................................................................9
Your Hospitals Path to the Second-Curve Framework.........................................................................................11
Organizational Capabilities............................................................................................................................................13
Top 10 Strategic Questions..........................................................................................................................................15
Potential Paths..................................................................................................................................................................16
Examples of Potential Paths..........................................................................................................................................23
Case Studies......................................................................................................................................................................26
Appendix 1: Assessment of Integration Capability...................................................................................................33
Appendix 2: Current Value-Driven Programs...........................................................................................................36
References.........................................................................................................................................................................37
Endnotes..........................................................................................................................................................................38
Executive Summary
Environmental factorseconomic climate, evolving payment models, shifting patient and workforce
demographics, political and regulatory pressures and the Affordable Care Actbuild the impetus
for dramatic change in the health care field. They challenge hospitals and care systems to accelerate
organizational transformation to provide better, more efficient and integrated care for patients and
communities, while assuming more financial risk and increased accountability.

The health care field will ultimately shift from the first curve, where hospitals operate in a volume-
based environment, to the second curve where they will be building value-based care systems
and business models. Many hospitals are in a period of transition known as life in the gap. While
this transition may generate fear, it provides health care organizations with an incredible leadership
opportunity to play a critical role in reducing the total cost of care.

Hospital leaders need to proactively develop strategies to achieve the second curve; waiting is
dangerous. If a fundamental shift in health care happens in three to five years, the time is now for
hospital and care system leaders to make strategic, yet swift, movement toward achieving health cares
Triple Aimimprove care quality and patient experience, improve population health and reduce per capita
costs. Leaders must heed the best practices and lessons learned in the first-curve environment and apply
them to the second-curve environment.

When and how to move from the first curve to the second curve are difficult decisions. To survive life
in the gap, leaders need to develop the capacity to take risks, and getting to the second curve requires
greater clinical, financial, operational and cultural integration. Additionally, redesigning care is essential to
any future health care state.
This resource, a product of the 2013 American Hospital Association Committee on Research, outlines
several potential paths to manage life in the gap and achieve the Triple Aim. It highlights several
successful, integrated delivery programs, as well as different forms of integration, all designed to provide
opportunities to accelerate organizational transformation.

Key issues that hospital leaders need to consider in their transformational journey are:
Health care is moving to new performance models in which organizations are integrating
financial risk and care delivery.
There is no one-size-fits-all model, as provider capabilities and community needs are different
everywhere.
The status quo is not a viable strategy because the environment is changing rapidly.
Each hospital and care system can consider multiple paths.
Each path has its own distinct risks and rewards.
The figure Your Hospitals Path to the Second-Curve Framework lists the environmental factors
impacting all hospitals and offers strategies to implement and capabilities to master for the future. It
also provides an overview of potential pathspartner, redefine, specialize, integrate, experimentand
describes several steps toward transformation, with key strategic questions and assessments.

Hospital and care system leaders are being called upon to set the course for the nations health care
system. While paths to future success may be different, hospitals can use the framework in this report
to dramatically improve care delivery and population health and reduce the total cost of care over the
next five years by up to 25 percent.
Figure: Your Hospitals Path to the Second-Curve Framework
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Introduction
Strategic Issues in the Current Health Care Environment
The current health care system in the United States is fragmented and costly. To improve the quality,
value and outcomes of care, incentives need to be better aligned and coordination needs to improve.
1

Environmental pressures are driving hospitals and care systems toward greater clinical integration,
financial risk and increased accountability (see Figure 1). The 2013 AHA Environmental Scan identified
some of these environmental pressures:
1. Patient demographics will shift significantly throughout the next decade.
2. Enhancing care coordination during hospital-to-home transitions has consistently shown
beneficial effects on cost and care quality, requiring hospital leaders to focus on care after
patients leave the hospital.
3. Political and regulatory pressures are compelling hospitals and care systems to provide efficient
and optimal patient care and address market volatility.
4. Hospitals need to serve multiple patient populations effectivelye.g., dual eligibles, Medicaid
beneficiaries and chronically ill patients.
To help with health care transformation, in 2010 the AHA Committee on Research released Strategic
Issues Forecast 2015, which identified five strategic issues for hospitals and care systems:
1. There is increasing pressure on all health care organizations to become more efficient.
2. New payment models are critical to health care system improvement.
3. Bending the cost curve is essential for long-term financial sustainability at the national level and
maintaining global competitiveness.
4. New models of care emphasizing care coordination across hospitals and care systems, other
providers and the community are critical for quality improvement.
5. Quality is improving but must be further accelerated.
The Future of Hospitals and Care Systems
The 2011 AHA Committee on Performance Improvement released Hospitals and Care Systems of the
Future, a report that outlined 10 must-do strategies for hospitals and care systems to succeed in a
rapidly changing environment. Four of these strategies were identified as major priorities (see Figure 1).
1. Aligning hospitals, physicians and other providers across the continuum of care
2. Utilizing evidence-based practices to improve quality and patient safety
3. Improving efficiency through productivity and financial management
4. Developing integrated information systems
5. Joining and growing integrated provider networks and care systems
6. Educating and engaging employees and physicians to create leaders
7. Strengthening finances to facilitate reinvestment and innovation
8. Partnering with payers
9. Advancing an organization through scenario-based strategic, financial and operational planning
10. Seeking population health improvement through pursuit of the Triple Aim
Figure 1: The Future of Hospitals and Care Systems
The Affordable Care Act, signed into law in 2010, is fundamentally changing the way health care is
delivered. It has pressured and encouraged health organizations to innovate and redefine payment
and care delivery. Because of the Great Recession that began in December 2007 and rising health
care expenditures, there is a growing interest in integrated delivery systems to improve quality and
outcomes and reduce health care costs. Pioneering health care systems have tested various IDS models
and improved care coordination, physician alignment, performance measures and patient outcomes
accomplishing the four top priorities presented in the Hospitals and Care Systems of the Future report.
Other health care organizations are testing new payment and service delivery models. The Center
for Medicare and Medicaid Innovation, a provision of the Affordable Care Act, funds some of these
developments. (See Appendix 2: Current Value-Driven Programs)
Aside from political and regulatory pressures, the health care industry will face a shift in patient and
workforce demographics. Over the next decade, the demand for health care services will rise when
baby boomers retiremost of them are projected to live longer as a result of new treatments and
technology. Future health care demands will not be met by the current and projected labor supply.
Nursing and physician shortages alone will continue to get worst. Hospitals and care systems will need
to evolve into organizations that are more team oriented and patient centered to adapt to the new
workforce culture.
Must-Do Strategies for Hospitals of the Future
1. Aligning hospitals, physicians and other providers across the continuum of care
2. Utilizing evidence-based practices to improve quality and patient safety
3. Improving efficiency through productivity and financial management
4. Developing integrated information systems
Environmental Factors
Increasing focus on improving quality and efficiency, greater clinical integration,
assuming more financial risk and accountability
Critical access hospital
Small/rural hospital
Safety-net health care system
Independent community hospital
Academic medical center
Multifacility health system
Specialty hospital
H
Source: AHA COR, 2014.
As hospitals and care systems move to different potential paths presented in this report, it is paramount
that they focus on how care is delivered. Hospitals and care systems have the opportunity to
redefine the industry. Starting with redesigning care delivery, hospitals and care systems can eliminate
inefficiencies within the system that will lead to better, integrated care and lower total cost of care.
Redesigning how care is deliveredthrough greater use of teams and leveraging the skills and
capabilities of all care providers in different settingsis essential to achieving patient-centered care.
This requires new workforce planning models both locally and nationally, educating and engaging the
workforce toward second-curve environment attributes and redeploying the current workforce toward
new models of care. All will markedly improve the culture of health care organizations. Redesigning care
provides a foundation for any organization embarking on potential paths.
Defining Integrated Delivery Systems
Although there is no current consensus, integrated delivery systems typically are described as
collaborative networks linked to various health care providers that offer a coordinated and vertical
continuum of services.
2
For this report, a modified definition of IDSs from Remaking Health Care in
America: Building Organized Delivery Systems is used: a network of organizations that provides or
arranges to provide a coordinated continuum of services to a define[d] population and
is...held accountable for the outcomes[,] health status and financial risk of the population
served.
3
Characteristics of IDSs
The Essential Hospitals Institute identified seven characteristics of a fully integrated health care
delivery system:
4
1. Value-driven governance and leadership: The delivery systems governing body and
administrative leadership are committed to and focused on achieving the benefits of integration.
Organizational structure supports integration. Strategic, financial and operational planning
toward integration is clear. Data are transparent throughout the organization and to
the community.
2. Hospital/physician alignment: IDSs engage health care providers in developing an integrated
model. For example, organizations incorporate feedback from medical providers when making
administrative decisions. Clinicians and administrators also work together to make many
decisions.
3. Financial integration: IDSs are well prepared to assume risk-based payments. With payers,
supported by staff, resources and IT infrastructure, they are able to manage contractual
relationships.
4. Clinical integration/care coordination: IDSs provide a full range of services in their
own facilities or on an outsourced or contracted basis. Care transitions and handoffs in IDSs
are effectively managed between settings, a result of strong collaborative relationships and
accountability among teams and other stakeholders.
5
5. Information continuity: IDSs utilize electronic health records to track patient visits and
health outcomes, and these records are accessible to providers within and outside the system.
6. Patient-centered and population health-focused: IDSs align their resources with needs
of the patient population and provide significant support through social services and convenient
access to care. Nearly all staff in IDSs are trained in cultural and behavioral competencies to
better serve patients.
7. Continuous quality improvement and innovation: IDSs foster an environment that
encourages professional growth and empowers employees to innovate. Strategic activities are
often tested through pilot projects, and medical providers employ evidenced-based practices.
Impact of IDSs
By improving the performance of health care organizations, IDSs ultimately improve patient care. For
example, IDSs:
Kept health care costs down by working under fixed-price contracts to deliver health services.
6
Managed operational costs by developing disease-management programs to train other health
care professionals in duties previously performed only by a physician.
7
Improved the quality of care by compiling comprehensive medical records and allowing
physicians to share and access a patients complete medical history.
8, 9, 10, 11, 12
Supported medication adherence and made tracking medications easier using EHRs.
13, 14, 15, 16, 17, 18
Reported greater job satisfaction among staff due to blending of professional cultures and
increased cooperation, teamwork and communication with other agencies.
19, 20
Improved quality of care, in terms of clinical effectiveness.
21, 22, 23, 24, 25, 26, 27, 28, 29
Your Hospitals Path to the Second-Curve Framework
Hospitals and care systems can evolve to varying levels of integration and find value in integration from
their own vantage points, or organizational lenses (Figure 2).
Figure 2: Strategies for Health Care Transformation
Hospital care delivery organizations include services traditionally offered within the four walls of the
hospital, while nonhospital care delivery organizations include services delivered by ambulatory facilities,
post-acute care organizations and health insurers. This report focuses on the potential paths for hospital
care delivery but recognizes that many of todays hospitals also operate nonhospital care delivery
components.
The following descriptions provide a broad brush in considering different hospital types, not to serve as
a limiting factor but for dialogue regarding general hospital types.
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Hospital Care
Delivery Organizations
Specialty hospital
Nonhospital Care
Delivery Organizations
Medical groups
Post-acute care
Health insurers
Organizational Lenses
Hospital Care Delivery Organizations
Critical access hospitals are Medicare-participating hospitals located more than 35 miles from the
nearest hospital or more than 15 miles from areas with mountainous terrain or secondary roads, or
they were certified as a critical access hospital before January 1, 2006, based on state designation as a
necessary provider of health care services to residents in the area.
30
Critical access hospitals have no
more than 25 beds for either inpatient or swing bed services. They provide 24/7 service with either on-
site or on-call staff.
The AHA identifies small and rural hospitals as having 100 or fewer beds, 4,000 or fewer admissions, or
located outside a metropolitan statistical area. Rural hospitals provide essential health care services to
nearly 54 million people, including 9 million Medicare beneficiaries.
Safety-net health care systems provide care to low-income, uninsured and vulnerable populations.
31
They
are not distinguished by ownership and may be publicly owned, operated by local or state governments
or nonprofit entities.
32
In some cases, they are for-profit organizations. These health care systems rely
on Medicaid, and to a lesser extent Medicare, as well as state and local government grants as variable
sources of revenue for most of their providers.
Independent community hospitals are freestanding health care providers typically located in market
areas with 50,000 or more residents.
33
They operate between 100 and 350 beds.
An academic medical center is an accredited, degree-granting institution of higher education and can
include hospitals with major or minor teaching programs.
34

A multifacility health system is formed when hospitals undertake an organizational restructuring such
as network affiliation or partnership with other hospitals.
35
These care systems have two or more
general acute care hospitals and are the most common organizational structure in the hospital field; in
fact, almost 200 hospital systems account for half of all hospitals and hospital admissions in the United
States.
36
Specialty hospital
Specialty hospitals are centers of care that are built for certain patient populations, such as children, or
that provide a particular set of services, such as rehabilitation or psychiatric services.
Nonhospital Care Delivery Organizations
Nonhospital care delivery organizations, such as post-acute providers, physician groups, home health
agencies, hospice providers and alternate-site companies including ambulatory surgery centers, urgent
care centers and dialysis companies, play an important role in the transformation of the health care field.

Organizational Capabilities
Assessing current organizational capabilities is key to understanding a health care organizations current
level of integration and potential for further integration (see Appendix 1). This requires exploring and
evaluating the current financial, clinical and operational risk tolerance, along with the organizations
cultural underpinnings.
Regardless of a hospitals or care systems current or future level of integration, the organization needs
to link its activities to its mission and value statement. To do this, hospitals and care systems need to
deliver core performance and assess their potential for further capabilities, such as expanding reach,
conducting information exchange and accepting financial risk (Figure 3).
Figure 3: Organizational Capabilities to Fully Integrate Care
Organizational capabilities are dependent on the type of integration model the hospital hopes to achieve.
All hospitals and care systems must be able to deliver core performancequality and efficiency. It is a
foundational capability in order to succeed in the second curve of health care delivery. Few hospitals
and care systems, because of size and scope, have the capability to expand their reach with populations
and services and go beyond conducting information exchange as an additional capability. And even fewer
can accept financial risk to deliver the best value to the patient population. Following are some specific
examples needed for each capability.
Deliver Core Performance (Quality and Effciency)
Develop strong organizational leaders
Align executive leadership with the organizations mission and vision
Empower staff for organizational change
Identify transformational leaders
Deliver core performance (quality and efficiency)
Expand reach
Conduct information exchange
Accept financial risk
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Increase organizational transparency
Engage all stakeholders (i.e., employees, physicians, the community)
Improve internal communication
Report meaningful information to consumers
Implement shared decision-making programs
Focus on performance and quality improvement
Use clinical quality performance tools for outcome measures
Develop quality improvement skills among clinical staff
Measure clinical performance with evidenced-based tools
Use consistent and thorough personnel performance measurement
Redesign care process
Provide more team-based care throughout the continuum of care
Leverage technology in all services
Expand Reach
Expand availability of health care services
Engage and educate health care users by implementing patient and family engagement practices
(Refer to the 2012 AHA Committee on Research report Engaging Health Care Users: A
Framework for Healthy Individuals and Communities for strategies to engage health care users.)
Implement outreach programs
Promote patient accountability
Deploy preventive health intervention
Use evidenced-based practices
Connect with community resources
Conduct Information Exchange
Use information systems
Implement electronic health records
Enhance health information system interoperability across sites of care
Use existing data to facilitate analysis and reporting for process improvement and
behavioral change
Use predictive modeling for population health management
Use data analytics for care management and operational management
Accept Financial Risk
Manage fnancial risk and use actuarial science for risk management
Conduct health-risk assessments on defined populations
Conduct a thorough due diligence process
Expand financial planning and modeling
Experiment
Use value-based payment
Test care delivery models
Assess risk tolerance
Top 10 Strategic Questions
To determine desired paths, hospital care delivery organizations need to address 10 strategic questions.
Responses to each question provide an organizational assessment that leaders can use to choose an
optimal path or a series of paths for transformation.
1. What are the primary community health needs?
2. What are the long-term financial and clinical goals for the organization?
3. Would the organization be included in a narrow/preferred network by a health insurer, based
on cost and quality outcomes?
4. Is there a healthy physician-hospital organization (a business model that aligns physicians in
private practice with hospitals and hospital-employed physicians)?
5. How much financial risk is the organization willing or able to take?
6. What sustainable factors differentiate the organization from current and future competitors?
7. Are the organizations data systems robust enough to provide actionable information for clinical
decision making?
8. Does the organization have sufficient capital to test and implement new payment and care
delivery models?
9. Does the organization have strong capabilities to deliver team-based, integrated care?
10. Is the organization proficient in program implementation and quality improvement?
Potential Paths
Paths toward Health Care Transformation
Assessing integration capabilities and answering strategic questions will help hospital and care system
leaders determine potential paths that provide high-quality, affordable care. Depending on the value an
organization seeks to create, one or more or a combination of these paths can be pursued:
1. Redefine to a different care delivery system (i.e., more ambulatory or long-term care oriented)
2. Partner with a care delivery system or health plan for greater horizontal or vertical reach,
efficiency and resources for at-risk contracting (i.e., through a strategic alliance, merger
or acquisition)
3. Integrate by developing a health insurance function or services across the continuum (e.g.,
behavioral health, home health, post-acute care, long-term care, ambulatory care)
4. Experiment with new payment and care delivery models (e.g., bundled payment, accountable
care organization or medical home)
5. Specialize to become a high-performing and essential provider (e.g., childrens hospital,
rehabilitation center)
As Figure 4 illustrates, there is not a single transformational journey for hospitals. A comprehensive
assessment may suggest a customized path or series of paths. For example, hospitals that choose to
experiment with new payment and care delivery models have the option to later redefine, specialize,
partner or integrate. Hospitals that choose to redefine after experimenting with new payment and care
delivery models can either specialize or partner. Hospitals that choose to specialize can partner, and
those who already chose to partner can integrate. The ultimate goal is not to fully integrate but to select
one or more paths that best fit the goals and objectives of the organization.
Figure 4: Determining Paths toward Health Care Transformation
Integrate
Partner
Redefine
Multifacility health systems with
health insurance function
Small/rural hospitals, independent
community hospitals, academic medical
centers, multifacility health systems,
specialty hospitals
Specialty hospitals,
centers of excellence,
service lines within all hospitals
All hospitals
Specialize
Experiment
All hospitals
Guiding Questions
Once a path or series of paths has been identified, hospital or care systems must evaluate the viability
of the desired transformation. This requires an honest assessment of organizational goals and needs,
current capabilities and the ability to support and sustain the transformation.
The guiding questions in Table 1 facilitate organizational change across multiple dimensions. The goal
of these questions is for hospital and care system leaders to reflect and gain new perspectives on the
benefits and value of integration, study available options and set realistic and manageable expectations
when considering organizational transformations. The last section of the table has guiding questions for
each specific path.
Table 1: Guiding Questions for Health Care Transformation
Setting goals and establishing intent
What does the hospital or care system want to achieve in the long term for care delivery and
operational performance? (e.g., revisit mission and vision, dramatically improve performance
outcomes, significantly reduce operational costs)
Recognizing the realities of the health care environment
What is the impact of national health care reform on the organization? (e.g., emerging payment
models such as bundled payments and accountable care organizations)
Does the hospital or care system understand which efficiency and quality criteria are necessary
to join a network or partner with another organization?
What federal and state level impediments exist? (e.g., antitrust)
What is the organizations contribution to reducing the total cost of care for the community?
Determining market needs
What are the current admission and ambulatory utilization trends? (i.e., are they decreasing,
stable or growing?)
Who are the current and future competitors and how are they evolving?
What is the economic health of the hospital in relation to the community? (e.g., current market
dynamics, patient demographics, long-term needs and available partners)
Determining community needs
What are the weaknesses of the existing data system to analyze population health?
What are the communitys population health needs?
Is the community aware of the hospitals or care systems intent to transform?
What assets can the hospital bring to improve the health of the population?
What other community organizations can the hospital or care system collaborate with?
How should the hospital portion out the limited funds dedicated to population health?
How much should the hospital allocate to unfunded areas of need? (e.g., behavioral or mental
health)
Assessing financial status
What are the organizations overhead expenses and how are they trending?
Does the organization have a large amount of debt? (i.e., debt-to-equity ratio)
Does the organization have debt agreements that affect organizational and corporate flexibility?
What amount of financial dilution is acceptable in return for new organizational capability?
What are the current and projected sources of revenue, profitability and cash flow, and how are
these projected to change over time?
What are the implications of the changing financial picture and market competition for the
organizations mission, vision and strategy?
What impact will declining inpatient utilization have on the organization?
Assessing internal capabilities
What are the organizational strengths (that can be utilized) and weaknesses (that can provide
opportunities for growth)?
What are the available assets and resources to the organization? (e.g., leadership, financial capital,
workforce, etc.)
How will the hospital cross-train employees and prepare them for future jobs?
Assessing corporate culture
Is the organizations workforce team oriented with a demonstrated history of collegial
relationships?
What is the relationship between the medical staff, management and other members of the care
team?
What is the organizations ability to resolve sensitive issues that affect clinical strategy? (e.g.,
credentialing, recruitment, hospital-based physician contracts)
What is the organizations history with implementing change?
Assessing facilities
Are the current facilities designed for the future in terms of expansion or reconfiguration for
different services?
Managing risks
How much risk is the organization willing to take? (e.g., financial, care delivery, operational and
organizational culture risks)
Is there tolerance for lower satisfaction and quality ratings?
Developing a structure and process for implementation
What is the time frame for implementing a potential path?
Who is responsible for managing the process? (e.g., work group, independent consulting firm)
Who will conduct and execute due diligence?
Developing a measurement process
How will the hospital or care system measure revenues and expenses for each clinical service?
What are the organizations critical success factors?
What are the organizations measurable milestones for the next one to three to five years?
How will the hospital or care system measure the impact of integration? (e.g., use of assessment
tools, scorecards and staff and patient evaluations)
How will the hospital or care system monitor and adjust to environmental changes?
Guiding Questions for Specific Paths
Redefine to a different care delivery system that may be more ambulatory or long-term care oriented
Determining need
Is inpatient care the primary community health care need?
Under what conditions will inpatient care be available and where?
What discussions are needed with the community and its leaders?
Creating ambulatory or long-term care-oriented facilities
How will the hospital further develop ambulatory services?
How will the hospital economically design a facility that not only enhances patient experience but
also creates brand recognition and customer loyalty?
How will the hospital develop satellite and neighborhood clinics that improve, support and sustain
population health?
Building an infrastructure
Does the hospital have access to capital needed to expand or transform physical spaces?
Partner with a care delivery system
Organizational objective
Are there compelling reasons to partner?
What does the organization hope to achieve from the partnership?
Organizational advantages
What value does the organization provide to prospective partners? (e.g., opportunity for market
extension, greater availability of primary care physicians)
What value does the prospective partner bring to the organization? (e.g., proportion of the
patient population being served by the prospective partner)
Organizational impediments
What organizational issues need to be addressed before approaching a potential partner? (e.g.,
quality, safety, capital)
What board discussions need to take place for partnership consideration?
Criteria for selection
What services does a partnering organization bring to the table and how do they benefit the
community?
What is the desired level of experience from a prospective partner? (e.g., number of hospitals in
the current system, years of operation as a system)
What discussions are needed with the community and its leaders?
Identifying prospective partners
Are there attributes of a larger delivery system that the organization can benefit from? (e.g.,
financial health, brand, access to group purchasing and resources, financial stability, ability to
access capital, refinancing of long-term debts with lower rates)
Is there a cultural fit with a potential partner organization?
Is there an agreed-upon business model that facilitates better health care outcomes and services?
Preparing to merge with the larger, regional delivery system
Have the regulatory risks been assessed?
37
How will the workforce be managed?
Partner with a health plan for more at-risk contracting (shared savings, capitation)
Determining need
What board discussions need to take place for partnership consideration?
Does the organization have the scale and population size for greater at-risk payments?
Exploring options
Does the organization want to partner with payers or take on more financial risk?
Which payer organizations are candidates based on services most attractive to patients,
employers, the payer and organization?
What are the attributes of the prospective health plan partner? (e.g., financial, brand, etc.)
How does the prospective health plan partner compare to other insurers in the market?
Is there an agreed-upon business model that facilitates better health care outcomes and services?
Experimentmedical home initiatives
Determining capacity
Does the organization have strong physician affiliation to provide primary care?
Is the current practice equipped to become a medical home? (e.g., sophistication of health
information technology)
Does the organization have the capability to deliver continuous, accessible, high-quality primary
care? (e.g., multidisciplinary teams that actively participate in the continuum of care)
Experimentbundled payment
Determining need
Under what conditions should a bundled-payment model be applied?
What data are needed to support bundled payment?
What capabilities are needed to develop bundling inpatient and ambulatory payment and care
delivery?
What capabilities are needed to develop and manage a shared-savings ACO?
Exploring options
Should the hospital or care system contract with or acquire physician practices?
What providers and services should be included in the bundled payment?
Setting up bundled payment
How will payments be risk-adjusted and set?
How will expenses be measured and funds allotted?
What expenses will constitute success and how will success be recognized?
Integrate to develop a health insurance function
Determining capacity
What health insurance capabilities is the organization lacking? Is there opportunity to develop
these capabilities or should partners be sought?
Is there sufficient capital to meet infrastructure demands? (e.g., IT capabilities to manage financial
transactions)
Does the care system have a network of providers to attract enough employers and individual
customers?
Assessing the market
What other health insurers are in the market and how do they compare?
Creating a health plan
How will the health plan develop competitive pricing?
What are the goals of developing a health plan versus contracting with a health plan?
How will claims be processed efficiently?
How will the care system utilize direct access to clinical, claims and pharmaceutical data and lab
results (that provide a full picture of patients and their incurred costs) to continually improve its
health plan function and health care outcomes?
What services does the organization need to provide a continuum of care?
How will the hospital or care system align provider behavior to optimize financial and clinical
care?
Specialize to become a high-performing and essential provider
Evaluating clinical performance strengths and weaknesses
Can the hospital or care system provide higher quality, more efficient specialized services than
currently offered in the community?
Does the hospital or care system have enough data and infrastructure support to assess physician
quality and efficiency?
Is there a shared commitment to standardize practices among physicians in the hospital?
Assessing viability for expansion
What scale and efficiency can the hospital or care system provide for specialized services?
How does the hospital or care system compare to benchmark goals for quality, service and
financial performance?
Factors Infuencing Path Progression
Multiple factors contribute to how soon and how quickly hospitals and care systems can select a path
and move forward.
38
Every market is different and there are many forces to consider, including:
Changing payment systemIncreasing pay for value by payers will necessitate a quicker move
down the paths for hospitals and care systems.
Degree of physician alignmentCommunities with greater physician alignment with hospitals
and care systems will mean a quicker move on the path(s).
Health care needs of the communityFactors such as changing demographics can have a
significant effect on health services of the community; more changes in services will push
hospitals to move down path(s) quicker.
Purchasers moving to new modelsThe focus and desire of purchasers to move to new
payment models, such as direct contracting or narrow networks, will influence hospitals and
care systems to move down path(s) faster.
Providers in the market moving to new modelsIf there are a number of payment models
being tested, such as bundled payments, shared savings and accountable care, hospitals and care
systems will move faster down the path(s).
Regardless of the path chosen, providing safe, effective and high-quality care for patients is always the
primary goal. Hospitals and care systems play a critical role in bending the cost curve and must actively
engage in efforts to drive down costs by eliminating inefficiencies within the system, particularly health
care services that do not benefit patient care. Making health care more affordable during this time of
transformation presents challenges. Hospital leaders must aggressively pursue opportunities to reduce
costs, while implementing changes that cater to patient and community needs.
Examples of Potential Paths
There are different paths and levels of integration, and many hospitals and care systems have moved or
are moving toward them.
Redefine
Hospital care delivery organizations moving toward more ambulatory or long-term care
In May 2009, Harrington Memorial Hospital, based in Southbridge, Massachusetts, signed an agreement
to take over the administration of Hubbard Regional Hospital (now Harrington HealthCare at Hubbard)
in Webster, Massachusetts. Harrington Memorial Hospital eliminated the unprofitable inpatient
department and transformed Hubbard Regional Hospital into a comprehensive outpatient facility that
includes a full service emergency room, one of only two facilities in the state to successfully operate
an ER without inpatient beds on site.
39, 40

The emergency department at St. Andrews Hospital (now St. Andrews campus of LincolnHealth),
Boothbay Harbor, Maine, had low patient volume, and the majority of patients admitted could be
treated in an urgent-care center or by primary physicians more efficiently. To remain financially viable,
in October 2013 the hospital closed its 24-hour emergency room and replaced it with an urgent-care
center that is open for 12 hours each day of the week.
41
Partner
Hospital care delivery organizations that have partnered with a care delivery system or health plan for
greater horizontal and vertical reach, efficiency and resources for at-risk contracting
Advocate Physician Partners and Blue Cross Blue Shield of Illinois established a shared-savings contract to
achieve the Triple Aim. The partnership led to the development of AdvocateCare.
42
AdvocateCare
is an enterprisewide program that incorporates population health strategies across Advocate Health
Care.
In October 2013, Scottsdale Healthcare and John C. Lincoln Health Network in Arizona formed a
systemwide affiliation to create a new nonprofit health system, Scottsdale Lincoln Health Network.
43

The partnership is aimed at expanding acute and preventive services, improving care coordination,
integrating health information technology and sharing best practices without merging assets that could
implicate individual debt and obligated group.
44
In Georgia, 29 hospitals, 14 health systems and approximately 2,000 physicians formed an alliance
called Stratus Healthcare, the largest network in the southeastern United States. The alliance allows
providers to collaborate while remaining independent and retaining local leadership.
In 2010, OBleness Health System and OhioHealth System, a larger care delivery system, signed a
managed affiliate agreement. In June 2013, a memorandum of understanding was signed to begin the
due diligence process for membership, which was completed in October. At the time of publication,
OBleness Health System was in the final stage of becoming a full member of OhioHealth System.
McCullough-Hyde Memorial Hospital, a small, independent community hospital in Oxford, Ohio, is
looking to partner with a major health system in Cincinnati. As the hospital explores potential
partners, UC Health, Mercy Health Partners, TriHealth and the Christ Hospital were asked to
formally outline affiliation options.
45, 46
In June 2013, Ohio State University Wexner Medical Center formed an affiliation with Mount Carmel
Health System to strengthen care delivery in central Ohio.
47
The agreement expands on an existing
partnership between the two organizations and aims to explore opportunities to collaborate in clinical
care, research and medical education.
In September 2013, seven health systems in New Jersey and Pennsylvaniaconsisting of more than 25
hospitalsformed an interstate alliance called AllSpire Health Partners.
48
The health consortium has a
combined net worth of $10.5 billion. The alliance allows hospitals to pool their spending power, share
expertise and innovative approaches, and pursue research projects.
Integrate
Hospital care delivery organizations that have integrated by developing a health insurance function or
services across the continuum of care
Inova Health System, a nonprofit health care system in Northern Virginia, and Aetna, a health insurer,
collaborated to establish the Innovation Health Plan.
49
The goal of the partnership is to improve
the quality of care through expanded care coordination. Aetna supports Innovation Health Plan by
providing the operational, sales, marketing, underwriting, care management and quality assurance
and finance functions needed to operate the health plan. Meanwhile, Inova Health System provides
care management, wellness and health prevention programs and the Signature Partners Network, a
physician-led, clinically integrated provider network under development, which will be launched in
2014. Signature Partners Network is comprised of a select network of primary care physicians and
specialistsall employed by Inova and community-based organizationswho serve as the value-based
provider network for Innovation Health.
Rather than developing its own health plan, the Florida Hospital Healthcare System, based in Orlando,
has partnered with Health First of Rockledge in Rockledge, Florida, to offer insurance products. The
partners anticipate Florida Hospital will eventually acquire 49 percent of Health First Health Plans.
This relationship gives Florida Hospital immediate expertise to sell health insurance and access data
needed to identify treatment gaps.
50, 51
In September 2013, Catholic Health Partners acquired Kaiser Foundation Health Plan of Ohio and its
200-person medical group practice and care delivery operations with Ohio Permanente Medical Group,
Inc. in Northeast Ohio.
52
Experiment
Hospital care delivery organization that has experimented with new payment and care delivery models
Hospital Sisters Health System in Springfield, Ill., launched its Care Integration Strategy in 2008. The
strategy focuses on physician alignment using pluralistic models, including direct physician employment
and clinical integration. The strategy also emphasizes the development of competencies. This facilitates
evolution to more integrated care and population management using care delivery models, such
as advanced medical home and chronic disease management, that encourage quality outcomes for
patients.
Specialize
Hospital care delivery organization that has specialized to become a high-performing and essential
provider
In 2012, DaVita, a provider of kidney care services, purchased HealthCare Partners, a physician
practice.
53
DaVitas integration of the physician practice is a move toward an integrated delivery
network that contracts a full spectrum of care and receives global capitation.
54, 55
This transaction
positioned DaVita to participate in accountable care organizations and population health. It also allows
DaVita to manage the care of kidney patients before reaching the end stage of the disease.
Case Studies
Several health care organizations have implemented and tested various integrated delivery care
programs to improve care coordination, physician alignment, performance measures and patient
outcomes. The case studies in this section describe successful integrated delivery programs that can be
replicated by hospitals and care systems, regardless of their financial, clinical, operational or cultural level
of integration.
CareMore
Health Quality Partners
Hospital-at-Home Program (Presbyterian Healthcare Services)
Program of All-Inclusive Care for the Elderly (PACE)
ProvenCare (Geisinger Health System)
CareMore
CareMore is a health care provider that specializes in caring for Medicare Advantage patients. It has
headquarters in Cerritos, Calif., and centers across the Southwest United States, with new facilities in
Brooklyn, N.Y., and Richmond, Va. It is a wholly owned operating division of WellPoint.
Background
CareMore was established to improve the quality of geriatric care and eliminate the costs associated
with lower quality. Frail and at-risk elderly patients represent a big portion of health care spending.
CareMore focuses on its most at-risk patients to change the course of their disease. Its network of
clinics monitors and treats chronically ill older patients to improve their health and reduce the need
for costly medical care. Early interventions and preventive care, such as wireless scales and free rides
to medical appointments, save long-term costs and reduce hospitalizations and surgeries.
56
Intervention
CareMore founders developed the model with several elements of care coordination.
57
First, patients
are assigned a nurse practioner who assists in managing chronic conditions and solving social/
environmental factors that contribute to poor health outcomes. Second, CareMore employs internal
medicine physicians called extensivists who serve as hospital physicians, post-acute care providers
and primary care physicians for the most at-risk members. Extensivists coordinate care and monitor
individual patients throughout the care continuum. Third, to improve care and treatment compliance,
CareMore provides free transportation service to get patients to and from their appointments. Health
care professionals also conduct home visits to monitor a patients weight, assess home accessibility
and safety, ensure patients are taking their medications, etc. Fourth, CareMore promotes wellness
through wireless monitoring of patients with congestive heart failure or hypertension. Patients are
provided with wireless scales and wireless blood-pressure cuffs that transmit information back to the
CareMore care center team.
Results
The approach at CareMore improved care and quality outcomes without increasing total cost:
Hospitalization is 24 percent below Medicare average, hospital stays are 38 percent shorter, and
amputations among diabetics are 60 percent below average.
58
While CareMore employs more staff
members per patient than other companies, this preventive approach yields savings that reduce
member costs, which are 18 percent below industry average.
59
Patient satisfaction for CareMore
services is also high. According to a company survey, 97 percent of patients were very satisfied
or somewhat satisfied with the health plan, and 80 percent of patients indicated that they would
recommend CareMore to a friend.
60

Lessons Learned
The success of the program is attributed to the physician-led culture and top-to-bottom commitment
to patients. Physicians are provided with proper tools to effectively execute coordinated care, such as
a unified electronic health record system.
The challenge for CareMore was financing replicas of the program model in local communities. Each
replica has produced health outcomes similar to those at the original CareMore locations. However,
the start-up costs of new locations required extensive
investment, which has been curtailed in light of new
CMS payment changes.
CareMore
Leeba Leesin, President
[email protected]
(562) 622-2813
http://www.thinkwellpoint.com/programs/caremore
Health Quality Partners
Health Quality Partners is a nonprofit health care quality research and development organization in
Doylestown, Pa. Its aim is to improve population health outcomes through care system redesign and
advanced care coordination.
Background
Studies show that 95 percent of Medicare costs are spent on patients with one or more chronic
conditions; 78 percent of those costs are for patients with five or more chronic conditions.
61
In
response, Health Quality Partners participated in a national demonstration project sponsored by
CMS in 2002, and it developed a care management program that redefined care for the elderly
and chronically ill. Because of the successes of the program, Aetna contracted with Health Quality
Partners in 2009 to work with its members and primary care providers.
Intervention
Health Quality Partners enrolls elderly patients that have at least one chronic illness (from among:
coronary artery disease, heart failure, diabetes or chronic lung disease) and hospitalization in the
past year. Patients in the program are connected with a nurse case manager who monitors the
patients overall health, supports medication adherence, provides education and self-management
coaching and follows up during care transitions from other health facilities. The type and frequency
of contact from the nurse case manager varies according to changing patient needs and ranges from
weekly to monthly. Most interactions (more than 60 percent) occur in person either as a one-to-one
encounter or group program. This care management model uses a broad portfolio of evidenced-
based interventions designed to reduce cardiovascular and geriatric risks for Medicare patients with
chronic conditions.
62
For example, nurses promote physical activity, weight management, healthy
diet, vaccinations, social engagement and home safety.
63
A data and analysis system allows rigorous
monitoring of service delivery reliability per established performance specifications, which enables
management staff to conduct timely root-cause analyses and take corrective actions as needed.
Results
The care management program has made a tremendous impact on care quality and cost. An
independent study shows that the program reduced hospitalization by 33 percent and Medicare costs
by 22 percent.
64
All-cause mortality was reduced 25 percent.
65
The CMS demonstration, from which
these results were obtained, has been conducted as a long-term, prospective, randomized controlled
trialthe most rigorous method of program evaluation.
Lessons Learned
One key element contributing to the success of the Health Quality Partners model is the continuous
interaction and long-term relationship between nurse case managers and patients. The broad portfolio
of interventions provided by the program and the rigor applied to ensure service delivery reliability
are also key to the programs effectiveness. Ongoing, active collaboration with primary care, acute
care and long-term care providers, as well as community organizations, patients and their families are
another core element of the program. A nonjudgmental, supportive approach and a commitment to
listen, understand and honor patient preferences and choices are main values the model promotes.
Healy Quality Partners
Sherry Marcantonio, Senior Vice President
[email protected]
(267) 880-1733 ext. 27
http://hqp.org/
Hospital-at-Home
Hospitals and care systems that adopted the Hospital-at-Home model provide hospital-level care to
patients with acute medical issues in their homes.
Background
Bruce Leff, MD, along with a team of geriatric physicians and nurses from Johns Hopkins School
of Medicine and Public Health, recognized that older patients experience adverse events while
hospitalized. In 1995, they developed a care model, Hospital-at-Home, that provides safe and effective
care in the patients home.
Hospital-at-Home was developed to treat older adults with acute medical issues such as community-
acquired pneumonia, congestive heart failure, chronic obstructive pulmonary disease and cellulitis.
Hospitals and care systems that have adopted this model offer diagnostic tests and treatment
therapies. Since its inception, the Hospital-at-Home model has been implemented in numerous sites
throughout the country.
Intervention
In October 2008, Presbyterian Healthcare Services, a nonprofit health care system based in
Albuquerque, N.M., introduced the Hospital-at-Home program to improve clinical outcomes, increase
patient satisfaction and reduce costs. The program is offered to three patient populations in the area:
(1) patients who arrive at the emergency departments of either the Albuquerque and Rio Rancho
Presbyterian hospitals: Kaseman Hospital or Rust Medical Center; (2) patients who are referred from
physician offices, urgent care and the health systems home health agency; and (3) patients who are
transferred to the program from one of the hospitals.
66

Patients with community-acquired pneumonia, chronic heart failure, chronic obstructive pulmonary
disease, cellulitis and conditions such as nausea/vomiting/dehydration, complicated urinary tract
infections and thrombosis and pulmonary embolism, are evaluated by physicians to determine
eligibility for participation in the Hospital-at-Home program. Those who meet the criteria are given
the option to be hospitalized or receive comparable care in the comfort of their homes. The program
provides a range of medical care such as lab tests, ECGs, ultrasounds and X-rays at the patients
residence. From the programs inception to August 2013, 806 patients participated in the program.
67
Results
In 2012, 348 patients were offered the option to receive care at home, and 323, or 93 percent of
them, chose to participate in the Hospital-at-Home program.
68
Patients enrolled in the program were more satisfied with their care. Patient satisfaction scores were
6.8 percent higher in comparison to similar patients who were receiving inpatient care at Presbyterian
Healthcare Services (the comparison group consisted of 1,048 individuals).
69
As of July 2013, patient
satisfaction scores for Hospital-at-Home patients were 97.9 percent.
Hospital-at-Home patients also had better or comparable clinical outcomes than the comparison
group. They experienced zero falls versus 0.8 percent falls in the comparison group.
70
Hospital
readmission within 30 days of discharge was also 0.3 percent lower and mortality rate was 2.57
percent lower for patients in the program.
71
Between 2011 and 2012, readmission rates were about
5 percent. Among Medicare Advantage and Medicaid patients with common acute care diagnoses, the
Hospital-at-Home program achieved a 19 percent cost savings.
72
Lessons Learned
Several critical factors contributed to the success of the Hospital-at-Home program at Presbyterian
Healthcare Services.
First, the program has an integrated health plan, delivery system and medical group. This level of
integration has allowed for interoperability of information systems and the ability to compare cost
data across the health system.
Second, key players collaborated and were involved in the development and implementation process.
This includes clinical standards and orders for care delivery (from physicians), emergency department
interfaces, billing and reimbursement process, coding, documentation, support-process development
(such as intake, scheduling, medical records, auditing, and pharmacy), clinical quality and outcomes,
communications and marketing, human resources and staffing model development, orientation
and education, and policy development.
73
The ongoing support of high-level administration also
contributed to the programs success.
Third, technical assistance from the Johns Hopkins School of Medicine and Public Health proved to be
beneficial by shortening the implementation process.
74
Lessons learned from implementing the Hospital-at-Home model led to the rapid development and
implementation of a house-call program in April 2011.
75
Like the Hospital-at-Home model, the house-
call program prevents avoidable hospitalizations and provides ongoing care to older adults with
complex chronic illnesses in the comfort of their homes.
Presbyterian Healthcare Services
Melanie Van Amsterdam, MD, Physician Leader
Hospital-at-Home Program
[email protected]
(505) 724-7300
https://www.phs.org/Pages/default.aspx
Program of All-Inclusive Care for the Elderly (PACE)
PACE is a managed care program for dual eligibles that provides comprehensive long-term services
and support for elderly patients throughout the United States. As of February 2013, there are 94
PACE programs operating in 31 states.
76
Background
For 26 years, the PACE model has delivered a full spectrum of care to dual eligible patients, a complex
and costly group of patients. It is also cost effective to both government payers and health care
providers.

Intervention
The PACE program focuses on providing preventive care to help elderly patients live in their
communities. The program serves individuals who are age 55 and over and is certified by their state
to provide nursing home care. Organizations that participate in the PACE program partner with
specialists and other providers to offer health care services in the home or community and PACE
centers. The interdisciplinary team of health care professionals provides coordinated care and offers
comprehensive services in the patients home. In addition, patients have access to transportation
services to and from a PACE center that offers adult day programs, medical clinics, occupational and
physical therapies or medical appointments.
77

Results
Across all PACE programs, studies show that there have been fewer hospitalizations and nursing
home admissions, more contact with primary care providers, better health outcomes, higher quality
of life and greater satisfaction with care providers.
78, 79, 80, 81, 82, 83, 84
These significant outcomes have
enticed many hospitals and care systems to adopt the model, evidenced by its continued expansion
throughout the country.
Lessons Learned
Three factors contributed to the success of PACE programs.
85
First, Medicare and Medicaid pay a
fixed, combined, monthly amount to participating organizations regardless of services used by their
patients. Therefore, participating organizations have flexibility to offer needed services. Second, PACE
organizations partner with primary care providers and other health providers, such as nurses and
physical therapists, to provide comprehensive and coordinated care in the home and community.
Third, because participating organizations are responsible for the complete continuum of care
and cost of services provided, there is a financial incentive to prevent hospitalization, unnecessary
emergency room visits and premature nursing placements.
PACE
[email protected]
http://www.medicare.gov/nursing/alternatives/pace.asp
ProvenCare
Geisinger Health System in Danville, Pa., is a physician-led system that is part of the 2010 Premier
Health Care Alliances Accountable Care Collaborative.
Background
Geisinger Health System began looking for innovative ways to improve patient outcomes, service
quality and care value to adapt to the changing health care environment. In 2006, the health system
launched ProvenCare, a program that standardizes care in specific clinical areas and offers participating
hospitals a flat rate for each procedure, motivating them to provide quality care.
Intervention
ProvenCare provides fixed pricing for certain procedures, with a 90-day care warranty for
participating payers.
86
The fee is calculated at initial cost of the procedure plus 50 percent of follow-
up costs over a three-month period.
87
ProvenCare also uses and enforces evidence-based standards
in various procedures. For example, cardiac surgeons must follow a set of 40 guidelines. If there
are reasons to deviate from the guidelines, surgeons are required to justify clinical decisions from
an agreed-upon list of acceptable reasons.
88
This process provides doctors with flexibility in their
practice. In addition, ProvenCare offers disease management. Patients with congestive heart failure,
diabetes, hypertension and other chronic conditions are closely monitored and given goals to manage
their disease.
89
Results
The evidence-based standards of ProvenCare improved patient outcomes and reduced health care
costs. In its first year of operation, hospital readmissions fell by 44 percent, complications decreased
by 21 percent, and average hospital stays were reduced from 6.2 to 5.7 days for coronary artery
bypass graft surgeries alone.
90
The program has been applied to other clinical areas, including elective
percutaneous angioplasty, perinatal care and bariatric surgery.
Lessons Learned
The success of ProvenCare is attributed to three factors.
91
First, physicians are salaried and rewarded
for performance. Second, electronic medical record systems have integrated physician, nursing and
administrative services at Geisinger, which has reduced treatment duplication and improved care
coordination. For instance, emergency room doctors that have access to a patients EMR are able to
better determine whether a patient should be admitted to the hospital. Meanwhile, a rheumatologist
can use the EMR to identify patients who are at risk of osteoporosis and to initiate preventive
measures. Third, doctors are required to follow evidence-based standards. The treatment pathways in
place are designed to ensure the best patient outcomes while reducing treatment costs.
Geisinger Health System
Janet Tomcavage
Chief Administrative Officer
Geisinger Insurance Operations
Geisinger Health Plan
(570) 271-6784
Thomas Graf, MD
Chief Medical Officer
Population Health and
Longitudinal Care Service Lines
(570) 214-4996
www.geisinger.org/provencare/
Appendix 1: Assessment of Integration Capability
Assessing capabilities is key to understanding a health care organizations current level of and potential
for integration. This requires exploring and evaluating the current financial, clinical and operational risk
tolerance along with the cultural underpinnings of the organization.
Determining Current Level of Risks
Assessing Financial Risk
To assess the degree of financial risk, hospitals and care systems should evaluate arrangements with
other providers and payers (Figure 5). Contractual agreements between providers and payers range
from transactional costs with minimal financial risk to full accountability for all risk, such as capitation.
Figure 5: Degree of Financial Risk
Transactional costs (low risk): A hospital or care system develops contractual agreements with payers
to provide specific health care services at set costs.
Risks within components (moderate risk): A hospital or care system takes financial risk for specific
components of care delivery, such as hospitals taking DRG payments.
Full accountability to cost (high risk): A hospital or care system has its own health plan or partners
with a health plan to take accountability for the full cost of care for a defined population.
Assessing Care Delivery Risk
Assessing the degree of care delivery risk involves exploring relationships with internal and external
health care providers (Figure 6). These relationships can range from hospitals and care systems that
contract with various providers for pieces of the care continuum to hospitals and care systems that own
and provide full service in the continuum of care.
Figure 6: Degree of Care Delivery Risk
A component of the continuum of care (low risk): A hospital or care system subcontracts particular
services and is not responsible for those services.
Financial Risk
Low Moderate High
Transactional costs
Risks within components Full accountability to cost
Care Delivery Risk
Low Moderate High
A component of the
continuum of care
Partnerships to deliver care Full care accountability
Source: AHA COR, 2014
Partnerships to deliver care (moderate risk): A hospital or care system establishes partnerships with
delivery organizations to provide services and share responsibility across the continuum of care (home
health, post-acute, long-term, ambulatory, etc.).
Full care accountability (high risk): A hospital or care system provides services across the continuum
of care through their own providers and is responsible for all services.
Assessing Operational Risk
To determine the degree of operational risk, hospitals and care systems can identify themselves as
isolated systems that manage their own entitys performance objectives, as integrated systems that have
shared performance goals across all system components or as someplace in between (Figure 7).
Figure 7: Degree of Operational Risk
Isolated systems (low risk): Hospitals have operational systemsfinancial, human resources,
information technologythat may be reliable but independent from other systems.
Emerging common systems (moderate risk): Hospitals operate systems that support their
interconnectivity with partners.
Integrated systems and standardization (high risk): Hospitals have integrated systems that function
across organizational components and partners, which reflect standardization and reduces variation.
Assessing Organizational Culture
The culture of a hospital or care system determines its ability to meet the challenges of evolving health
care demands (Figure 8). Degrees of organizational culture can range from hospitals and care systems
that are still developing a common culture to those that have defined their organizational culture and
are highly reliable at delivering care efficiently. Leadership and governance complement organizational
culture, ranging from an independent approach with multiple governance structures to systemwide
governance aligned with the health care systems goals.
Figure 8: Degree of Organizational Culture
Operational Risk
Low Moderate High
Isolated systems
Emerging common systems
Integrated systems and
standardization
Organizational Culture
Low Moderate High
Developing common culture/
independent governance entities
Quality improvement culture/
developing systemwide governance
Adaptable, high-reliability culture/
system-based governance model
Developing common culture/independent governance entities (low risk): A hospital or care system
is still defining its own common organizational culture and needs to experience multiple cycles of
learning to become prepared in accepting and adapting to change. Organizational governance occurs at
multiple levels and/or entities, with a loose structure and little communication between the levels or
entities.
Quality improvement culture/developing systemwide governance approach (moderate risk):
Hospitals and care systems have a disciplined quality improvement culture that is continuously focused
on improving clinical outcomes, efficiency and patient experience. Governance is evolving to an aligned
structure that is systemwide or streamlined in the organization.
Adaptable, high-reliability culture/system-based governance model (high risk): Hospitals and care
systems exhibit a highly reliable culture focused on care that is safe, timely, efficient, effective, equitable
and patient-centered. The governance structure is systemwide and strategically aligned with the health
care organizations goals.
Appendix 2: Current Value-Driven Programs
The following is a list of current value-driven programs and models that are being tested and supported
by CMS Center for Medicare and Medicaid Innovation.
Primary Care Transformation
Federally Qualified Health Center (FQHC) Advanced Primary Care Practice Demonstration:
Care coordination payments to FQHCs in support of team-led care, improved access and
enhanced primary care services
Multipayer Advanced Primary Care Practice Demonstration: State-led, multipayer collaborations
to help primary care practices transform into medical homes
Bundled Payments
Bundled Payments for Care Improvement initiative: Organizations will enter into payment
arrangements that include financial and performance accountability for episodes of care. These
models may lead to higher-quality, better-coordinated care at a lower cost to Medicare.
Accountable Care Organizations
Pioneer Accountable Care Organization Model: Experienced provider organizations taking on
financial risk for improving quality and lowering costs for all of their Medicare patients
Advanced Payment Accountable Care Organization Model: Prepayment of expected shared
savings to support ACO infrastructure and care coordination
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31 National Association of Public Hospitals and Health Systems. (n.d.). What is a safety net hospital? Retrieved on June 17, 2013
from http://www.naph.org/Main-Menu-Category/About-NAPH/About-Our-Members/what-is-a-safety-net-hospital.aspx
32 Ibid.
33 Healthcare Financial Management Association. (2012, November 1). Stand-alone hospitals in the value journey: Organizational
road maps for value-driven health care. Washington, DC: Healthcare Financial Management Association. Retrieved on April 4,
2013 from http://www.hfma.org/Content.aspx?id=13965#Download
34 Wartman, S. (2007). The academic health center: Evolving organizational models. Washington, DC: Association of Academic
Health Centers. Retrieved on April 1, 2013 from http://www.aahcdc.org/Portals/0/pdf/AAHC_Evolving_Organizational_
Models.pdf
35 Melnick, G. and Keeler, E. (2007). The effects of multi-hospital systems on hospital prices. Journal of Health Economics. 26.
400-413. Retrieved on April 1, 2013 from http://lingli.ccer.edu.cn/ahe2010/Melnick,%20G.%20and%20E.%20Keeler%20
%282007%29.%20The%20effects%20of%20multi-hospital%20systems%20on%20hospital%20prices.pdf
36 Yonek, J., Hines, S. and Joshi, M. (2010, March 29). A guide to achieving high performance in multi-hospital health systems.
Washington, DC: The Commonwealth Fund and Chicago, IL: Health Research and Educational Trust. Retrieved on April
1, 2013 from http://www.commonwealthfund.org/Publications/Fund-Reports/2010/Mar/A-Guide-to-Achieving-High-
Performance-in-MultiHospital-Health-Systems.aspx
37 America Hospital Association and Jones Day. (2011). Principles and guidelines for changes in hospital ownership. Chicago, IL:
American Hospital Association. Retrieved on May 9, 2013 from http://www.hpoe.org/Reports-HPOE/principles_guidelines_
changes_hospital_ownership.pdf
38 Academy Health and Bailit Health Purchasing, LLC. (2013, September 25). Facilitators and barriers to payment reform: Market-
based, governmental, organizational and design considerations. Princeton, NJ: Robert Wood Johnson Foundation. Retrieved on
September 29, 2013 from http://www.rwjf.org/en/research-publications/find-rwjf-research/2013/09/facilitators-and-barriers-
to-payment-reform.html
39 Pilon, M. (2012, October 15). Major changesplus a notable acquisitionrevved up Harrington HealthCare.
Worcester Business Journal Online. Retrieved on August 30, 2013 from http://www.wbjournal.com/article/20121015/
PRINTEDITION/310129976
40 Brown, M. (2012, March 28). Harrington-Hubbard hospitals partner up: Deal will keep small, struggling Hubbard afloat.
Worcester Business Journal Online. Retrieved on September 24, 2013 from http://www.wbjournal.com/article/20090105/
PRINTEDITION/301059996
41 Sathian, S. (2013, August 19). Hospitals conversion plan unnerves rural Maine village. The Boston Globe. Retrieved on
September 3, 2013 from http://www.bostonglobe.com/metro/2013/08/18/residents-boothbay-harbor-maine-try-ward-off-
impending-loss-andrew-hospital/QbuhVa76HLacc2Iq7oMieL/story.html
42 Advocate Physician Partners. (2011). The 2012 value report: Benefits from clinical integration. Retrieved on December 19, 2012
from http://www.advocatehealth.com/documents/app/2012ValueReport-Complete.pdf
43 John C. Lincoln News. (2013, August 29). Scottsdale Healthcare and John C. Lincoln Health Network approve system-wide
affiliation. Retrieved on January 16, 2014 from http://www.jcl.com/news/scottsdale-healthcare-and-john-c-lincoln-health-
network-approve-system-wide-affiliation
44 Blesch, G. (2013, August 29). Scottsdale Healthcare, John C. Lincoln systems to combine. ModernHealthcare.com. Retrieved
on September 3, 2013 from http://www.modernhealthcare.com/article/20130829/NEWS/308299963
45 Bernard-Kuhn, L. (2013, August 22). Oxford hospital seeks link with health system. Cincinatti.com. Retrieved on August 30,
2013 from http://news.cincinnati.com/article/20130822/NEWS/308210049/1058/Old-texts-find-home-in-Sierra-LeoneLeft-
Michayla-Gamble-passes-more-book-to-Yerley-Vallecillo-both-seniors-at-the-Mt-Healthy-High-School-where-students-
where-packing-up-old-text-books-that-aren-t-being-used-any-more-to-be-shipped-to-Sierra-Leone-a-coun/
46 McCullough-Hyde Memorial Hospital News Release Center. (2012, October 31). McCullough-Hyde Memorial Hospital to
explore affiliation options. Retrieved on September 24, 2013 from http://mhmh.netreturns.biz/NewsReleases/Article_Detail.
aspx?id=d870dce1-fc95-4e26-a676-a4d488c34a16#.UkHZednsa7s
47 Ohio State University Wexner Medical Center News and Media Room. (2013, June 18). OSU Wexner Medical Center,
Mount Carmel Health System sign affiliation agreement. Retrieved on September 3, 2013 from http://medicalcenter.osu.edu/
mediaroom/releases/pages/mount-carmel-health-system-and-the-ohio-state-university.aspx
48 AllSpire Health Partners Press Release. (n.d.). Seven of the nations most recognized health systems form interstate alliance.
Retrieved on November 12, 2013 from http://www.allspirehealthpartners.org/sites/allspire/files/documents/AllSpire%20
Press%20Release%202.pdf
49 Aetna News Hub. (2012, June 22). Aetna and Inova Health System establish new health plan partnership in northern Virginia.
Retrieved on November 12, 2013 from http://newshub.aetna.com/press-release/corporate-and-financial/aetna-and-inova-
health-system-establish-new-health-plan-partnership
50 Evans, M. (2013, August 28). Hospitals seeing benefits of partnering with insurance companies. ModernHealthcare.com.
Retrieved on September 3, 2013 from http://www.modernhealthcare.com/article/20130828/BLOG/308289999
51 Health First News and Events. Health First and Florida Hospital Healthcare System partner to offer health insurance products.
Retrieved on September 24, 2013 from http://www.health-first.org/news_and_events/hf_fh_partner.cfm
52 Catholic Health Partners Newsroom. (2013, May 29). CHP and Kaiser Permanente Ohio announce initial agreement in Northeast
Ohio. Retrieved on September 20, 2013 from http://www.health-partners.org/news_show_local.asp?id=4081
53 Terhune, C. (2012, May 22). HealthCare Partners to be bought by DaVita in $4.42-billion deal. Los Angeles Times. Retrieved
on September 4, 2013 from http://articles.latimes.com/2012/may/22/business/la-fi-davita-healthcare-partners-20120522
54 Kutcher, B. (2014, September). Out of the comfort zone. ModernHealthCare. Retrieved on September 24, 2013 from http://
www.modernhealthcare.com/article/20130914/MAGAZINE/309149991
55 HealthCare Partners Press Releases. DaVita and HealthCare partners finalize merger: Combined commitment to clinical excellence,
patient quality of life, physician leadership. Retrieved on September 24, 2013 from http://www.healthcarepartners.com/
NewsRoom/releasedetails.aspx?rid=2
56 Main, T. and Slywotzky, A. (2011, October 3). The quiet health-care revolution. The Atlantic. Retrieved on April 17, 2013
from http://www.theatlantic.com/magazine/archive/2011/11/the-quiet-health-care-revolution/308667/
57 Ibid.
58 Ibid.
59 Ibid.
60 Ibid.
61 Klein, E. (2013, April 17). The solution Medicare is shutting down. The Washington Post. Retrieved on May 2, 2013 from
http://www.washingtonpost.com/business/the-solution-medicare-is-shutting-down/2013/04/26/12d50074-ad26-11e2-a8b9-
2a63d75b5459_story.html?wpisrc=emailtoafriend
62 Aetna News Hub. (2009, December 21). Health Quality Partners to provide care management program for AETNA Medicare
advantage plan members. Retrieved on May 3, 2013 from http://newshub.aetna.com/press-release/health-care-professionals-
and-networks/health-quality-partners-provide-care-management
63 Aetna News Hub. (2011, November 16). Aetna, Health Quality Partners see lower costs, fewer hospital admissions with care
management program for Medicare advantage members. Retrieved on May 3, 2013 from http://newshub.aetna.com/press-
release/products-and-services/aetna-health-quality-partners-see-lower-costs-fewer-hospital-adm
64 Brown, R., Peikes, D., Peterson, G., Schore, J. and Razafindrakoto, C. (2012). Six features of medicare coordinated care
demonstration programs that cut hospital admissions of high-risk patients. Health Affairs. 31(6). 1156-1166.
65 Coburn, K., Marcantonio, S., Lazansky, R., Keller, M. and Davis, N. (2012). Effect of a community-based nursing intervention
on mortality in chronically ill older adults: A randomized controlled trial. PLoS Med. 9(7).
66 Foubister, V. (2011, August/September). Quality Matters: Hospital at home program in New Mexico improves patients satisfaction
while reducing costs. Washington, DC: The Commonwealth Fund. Retrieved on August 26, 2013 from http://www.
commonwealthfund.org/Newsletters/Quality-Matters/2011/August-September-2011/Case-Study.aspx
67 Cryer, L., Shannon, S., Van Amsterdam, M. and Leff, B. (2012, June). Cost for Hospital at Home patients were 9 percent
lower, with equal or better outcomes compared to similar inpatients. Health Affairs. 31(6). 1237-1243. Retrieved on April 17,
2013 from http://content.healthaffairs.org/content/31/6/1237
68 Kuehn, B. (2012). Hospital at Home program cut costs, improves patient health and satisfaction. Journal of the
American Medical Association. 309(15). 122. Retrieved on April 17, 2013 from http://jama.jamanetwork.com/article.
aspx?articleid=1216461
69 Ibid.
70 Ibid.
71 Ibid.
72 Ibid.
73 Ibid.
74 Ibid.
75 Ibid.
76 National PACE Association. (2013). Pace in the States. Retrieved on April 17, 2013 from http://www.npaonline.org/website/
download.asp?id=1741&title=PACE_in_the_States
77 PACE4You. (2013). What makes PACE different? Alexandria, VA: National PACE Association. Retrieved on September 11,
2013 from http://www.pace4you.org/website/article.asp?id=14
78 Weiland, D., Lamb, V., Wang, H., Sutton, S. et al. (2008). Hospitalization in the Program of All-inclusive Care for the Elderly
(PACE): Rates, concomitants, and predictors. J Am Geriatr Soc. 48. 13731380.
79 Temkin-Greener, H. and Mukamel, D. (2002). Predicting place of death in the Program of All-inclusive Care for the Elderly
(PACE): Participant versus program characteristics. J Am Geriatr Soc. 50. 125135.
80 Sands, L., Yaffe, K. and Lui, L. (2002). The effects of illness on ADL decline over one year in frail older adults with and
without cognitive impairment. J Gerontol A Biol Sci Med Sci. 57. M449454.
81 Mukamel, D., Temkin-Greener, H., Delavan, R., Peterson, D. et al. (2006). Team Performance and risk adjusted health
outcomes in the Program of All-inclusive Care for the Elderly (PACE). Gerontologist. 46. 227237.
82 Grabowski, D. (2006). The cost-effectiveness of noninstitutional long-term care services: Review and synthesis of the most
recent evidence. Med Care Res Rev. 63. 328.
83 Friedman, S., Steinwachs, D., Rathouz, P., Burton, L. et al. (2005). Characteristics predicting nursing home admission in the
Program of All-inclusive Care for the Elderly people. Gerontologist. 45. 157166.
84 Branch, L., Coulam, R. and Zimmerman, Y. (1995). The PACE evaluation: Initialfindings. Gerontologist. 349359.
85 Gong, J and Lewis, A. (2013, March/April). PACE: Community-based model still leads the way for dual eligibles. Spectrum.
Chicago, IL: Society for Healthcare Strategy and Market Development. http://www.pace4you.org/website/staticdownload.
asp?id=378
86 Henry, R. (2009, April/May). ProvenCare: Geisingers model for care transformation through innovative clinical initatives
and value creation. American Health and Drug Benefits. 2(3). 122-127. Retrieved on December 11, 2012 from http://www.
ahdbonline.com/sites/default/files/pdf/PaulusI_AprilMay09.pdf
87 Abrams, L. (2006, September 26). Where surgery comes with a 90-day guarantee. The Atlantic. Retrieved on April 24, 2013
from http://www.theatlantic.com/health/archive/2012/09/where-surgery-comes-with-a-90-day-guarantee/262841/
88 Ibid.
89 Ibid.
90 Hurdle, J. (2009, December 8). Inside a U.S. healthcare island of excellence. Reuters. Retrieved on April 24, 2013 from
http://www.reuters.com/article/2009/12/08/us-usa-healthcare-geisinger-idUSTRE5B70RV20091208
91 Ibid.

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