Fulbright: We have outsourced some in the past, and it seems like it was with mixed results. Probably our goal is to keep those functions, those in the community if we can. I think a lot of times we feel like we can do a better job than that, but we do ask for some, of course, bad-debt collections.
Cusack: We outsource certain functions with the use of management. The management and all the policies and procedures around that are Northwell-driven. We dictate how they’re interacting with our customers. So specific to the functions, there is certain back-office follow-up we have outsourced with a strategic partner. There are certain coding functions that we’ve outsourced as well. Just simply a lack of resources within the local area with some of the specialties. Given our size, we’re unable to find them within the marketplace. It’s a hybrid, but all of it is managed by Northwell, because we want to ensure it’s in accordance with how we want to interact with the patient.
Medovich: We outsource what we need similarly to what Gary and Michele said. We have a vendor on-site to focus on Medicaid eligibility, charity care applications, worker’s comp, and motor-vehicle accident claims. It’s really just supplementing our current workforce, not to fully outsource, because we truly believe in looking at and focusing on the blocking and tackling strategies. It’s holding everyone accountable, and more importantly, holding your vendors accountable to make sure they’re doing their job. The key when you outsource is if they’re not performing, they’re gone. It’s holding them accountable as you would your own team.
MH: What percentage of your revenue is currently tied to risk-based contracts, both on the commercial and the government side? What would it take to push that number up?
Fulbright: We’re fairly low. Several years ago, we had our own HMO and participated in an HMO with some other hospitals. We learned quite a few things there. It was an expensive lesson, but it’s one thing we’ve been very successful at in the last two or three years. In Missouri, we’ve participated in the Missouri Medicaid medical home project. I think we’ve learned a lot there about how to manage patients and make sure they receive the care they should. It’s setting us up well to expand that to other providers. We do a similar thing with a couple of insurance companies. We also participate in Medicare+Choice, the chronic care management program and are applying for the Bundled Payments for Care Improvement Initiative this year. I think we’re positioned pretty well to be successful in that.
Cusack: If you’re just looking at specific risk-based components, it’s probably less than 5%, but we do participate in both commercial and government-type risk programs, which vary from pay-for-performance. I just mentioned various shared-savings arrangements and in one of our companies, Healthfirst, we have shared risk and full risk across various government products. So we’ve been at this for a while. We actually created our own commercial insurance company, CareConnect, which at its peak had over 125,000 lives, which we were at full risk for. (Northwell shut down that plan in 2017 after suffering financial losses in the prior year.)
Medovich: Right now, this is the easiest response you’ll receive: zero. We do not have that. We’re looking into bundled payments as an opportunity in regard to the BPCI Advanced. We’ll be applying for that. Other than that, we don’t have any currently.
MH: Why not?
Medovich: The majority of our contracts are already established and have been established for quite some time through what’s called the Greater Hill Country Project Japan Alliance.
MH: Commercial carriers, at least in Northwell’s area, want to move that way. Are you not seeing that?
Medovich: We’re not seeing that. We’re not seeing that at all. It’s a different market.
Fulbright: I think we’re very similar to what she expressed. We’re probably just not large enough to be on the radar that much for the health plans to try to do something and perhaps also the organization having the infrastructure to do so. What we’ve done so far in the medical home model, it’s not a full-risk type thing, but I think it is working well for us and the payers. I think that has some promise.
MH: I’ve talked to health system leaders about the importance of having a cost accounting system to track the actual cost of delivering care. That discussion has been in relation to the transition toward value-based care. Have your systems adopted cost accounting tools?
Cusack: We’ve had a cost accounting system probably since about 2000. We roll it out as new hospitals or entities join Northwell. In addition, we have a robust productivity tool and key performance indicators in some of the areas you mentioned: cost per operating room minute, for example, to be able to help find variation and understand where there are opportunities to gain efficiency from a cost perspective. We use our cost accounting system and these productivity tools to build our business plans. It helps with our contract negotiations and with identification of opportunities as we get into budgets each year. It’s definitely a discipline in terms of making sure that the model we have is well managed and people understand the cost assumptions underneath so they make the right operational decisions as they’re interpreting the numbers.
Medovich: We will adopt a cost accounting system probably in Q3 of this calendar year. It’s going to be a full cost accounting and decision-support system to do exactly what Michele said: Drill down to the service lines. You have to keep in mind that we’re nothing more than a rural, community hospital, and we’re going to do what we’re going to do best. That’s our area of focus. You don’t want to brag about being a half-billion-dollar company and lose money. I would rather brag about being a $100 million net patient revenue hospital and make money. You can get so specific you lose sight of the fact that cash is a fact, profit is an opinion. If your overall daily cash collection is under what you’re spending on a daily basis, Houston, you have a problem and you have to start looking at it. The reason we were delayed getting the cost accounting system up and running is that we had an upgrade to our electronic health record on March 1, 2019, so that probably took around a year and a half of our time and it was extremely successful.
Fulbright: We don’t have a cost accounting system. Of course, we do look at costs very closely in benchmarking. Recently we’ve had a project to look at all of our implants and other costs. Our productivity reporting, we do that every pay period and I try to get reports out in the managers’ hands within a couple of days after paychecks are issued. We definitely have to match staffing with volume.