Friday, August 30, 2013

For-Profit Hospital Town USA

Green Bay is “TitleTown”, just as Detroit is “Hockeytown” and St. Louis is the “Best Baseball Town in America”.  The descriptions are nicknames of cities and towns that are familiar to many and used with regularity throughout the sports industry.  In the healthcare industry, what if you heard the phrase “The Nation’s Health Care Capital” or “For-Profit Hospital Town USA”?   To some the answer might not be as obvious and the response might surprise….it’s Nashville, Tennessee.

Green Bay, Wisconsin is the NFL’s smallest market by far and the smallest city to boast a major professional sports franchise (pop. 100,353) however every game at Lambeau Field has been sold out since 1960. The Green Bay Packers have had 13 championships seasons including nine NFL championships prior to the Super Bowl era and four Super Bowl victories, more than any other team in the NFL.  The team has earned and embraced its nickname so much that the name "Titletown" appears on the city seal and the Green Bay Chamber of Commerce web address is

In Detroit, Michigan the term "Hockeytown" was part of a 1996 marketing campaign by the Detroit Red Wings, an Original Six team, to celebrate the team’s success after more than four decades of struggle.  It was also the same year the Red Wings won its first Stanley Cup since 1955 and the phrase is now a registered trademark owned by the franchise.  Detroit has won 11 Stanley Cups (four in recent past) are second only to the Toronto Maple Leafs and the Montreal Canadians, neither of which have won a championship in nearly two decades.

The national media and TV broadcasters commonly refer to St. Louis as the “Best baseball town in America”.  Drawing from a regional fan base that includes Missouri, Illinois, Arkansas, Oklahoma, Iowa, Indiana, Tennessee and Kentucky, the St. Louis Cardinals are one of only two MLB franchises to draw at least 3 million fans at home in 14 of the last 15 seasons.  They are also one of the most decorated and successful franchises in MLB history, having won eleven World Series championships, 18 National League pennants, and ten division titles. Their eleven World Series titles are second overall only to the New York Yankees.
Within the healthcare industry, the NFL, NHL, and MLB equivalent city is Nashville, Tennessee.  While it’s more commonly known as the center of the music industry, nicknamed "Music City", there are more than 300 healthcare companies that operate from Nashville on a multi-state, national or international basis.  In fact, globally, healthcare companies located there generate more than $70 billion of revenue and employ more than 400,000 people.  With a 50 percent increase from 1995 to 2008, clinical provider job growth in Nashville has outpaced the nation (35 percent) and Tennessee (40 percent).

The Nashville area is also pretty much the headquarters for the for-profit hospital industry, and is home to 16 public healthcare companies.  According to a July 2013 report by Becker’s Hospital Review, seven of the 13 largest for-profit hospital operators in the country (and three of the top four) are based in Nashville.  Hospital management companies from the area manage over 60 percent of all the for-profit hospital beds in the country.  Nashville also has a significant presence in ambulatory and outpatient surgery, dialysis, disease management, clinical research, hospital management support services and healthcare information technology.
While nicknames like “The Nation’s Health Care Capital” or “For-Profit Hospital Town USA” will never challenge the charm “TitleTown” or “Hockeytown”, in terms of importance Nashville, is well on its way to becoming the center of the healthcare universe.  Many healthcare leaders such as Dr. Thomas F. Frist, Jr. already refer to it as “The Silicon Valley of healthcare” and with the staggering amount the venture capital community has invested in healthcare services it hard to not recognize Nashville’s significance to the industry.

Thursday, August 22, 2013

Transitioning from Fee-For-Service to Fee-For-Value....a lot can happen in five years

Some believe that the transition from fee-for-service (FFS) to fee-for value (FFV) payment is still at least five years away….but a lot can happen in five years.  Consider how 2013 Philadelphia Phillies disappointing season came to be or Albert Pujols who'll be collecting game checks from the disabled list for the remain of the season.

Five years ago, the Philadelphia Phillies were one of the most dominant teams in MLB and on their way to winning the World Series….a little over a week ago they fired Charlie Manual, the manager that lead the team to that dominance.  In the midst of their success, they traded prospects for established veterans and signed their core players to long-term expensive deals in an effort to keep the group intact and win now by mortgaging the future.   Fast forward to today…..who could have predicted they’d become a team of oft-injured aging veterans with a depleted farm system and a culture of apathy possessing still just that one World Series ring from 2008 to mark this group’s era of success….a lot can happen in five years. 

There are plenty of opinions around when the transition from FFS to FFV will actually occur.  Is it two years, is it five?  As you’d imagine, those holding on tightest are the organizations that benefit the most from the current state.  Without forward thinking leadership with long-term vision they’ll hold onto today’s structure and the existing reimbursement models as long as possible and who can fault them.  However change is coming and some of it will be unpredictable.  Will they be ready?
In 2011, while Albert Pujols did not produce MVP seasons like in 2008 and 2009 (he was the unanimous choice) he still batted .300 was at the top of numerous offensive categories and put on a post-season performance that was epic.  He batted .350 and .478 in the first two rounds of the playoffs and joined Babe Ruth and Reggie Jackson as the only players in baseball history to hit three home runs in a World Series game at the time, becoming the first player in series history to have hits in four consecutive innings, and tied records for most hits and most RBIs in a World Series game.  That offseason he left the Cardinals as a free agent signing a huge contract with the Angels.  He struggled mightily to start 2012 and after a sub-par performance this year will now miss the remainder of the 2013 season.  The Anaheim Angels still owe him $212 million from 2014-21….a lot can happen in two years. 

Two years goes by in the blink of an eye, never mind five, ask those who’ve been around for a while.  It’s important to understand that whether you trying to build your physician network, restructure your organization to manage population health, or simply position yourself for success in a FFV world (whatever that ultimately means) that work needs to happen now. 

What has worked for us in the past is just that… the past…..and if we try too hard to hold on to today we risk leveraging our future.  The Phillies went “all in” with their efforts to keep that 2008 window open for as long as possible and they fell short of the ultimate goal.  They tried, which is great, but was it worth the risk because for the foreseeable future the organization will struggle.  Don’t drink the Kool-Aid Phillies’ fans….the window is closed.   

The Angels on the hand maybe didn’t go all in but they sure made a significant investment that after a mere two years would hardly be viewed as successful.  If Albert Pujols fails to perform at level that at least resembles his former self, how much will that investment impact the Angels going forward?

In healthcare, we have annual business development planning sessions, hire consultants to develop elaborate strategic plans, make numerous capital investments (human capital and otherwise) geared towards preparing for the future.  While the timeline may be up for debate, most would agree that this “FFV thing” is coming and significant changes are on the horizon.  The moral of this story is don’t hold onto today for too long and don’t leverage the future too much…… our long-term success will be determined by the decisions we make about where to invest today.

Tuesday, August 20, 2013

Every hospital merger is looking for a really good Tight End

Right now, Fantasy Football leagues are getting ready to establish teams and in most, a strange phenomenon will predictably occur that often changes the shape of each team’s draft.  In healthcare, a similar trend has begun that will change the landscape of hospital providers across the country as the industry enters a new era of mergers and acquisitions.

There are generally a few types of drafts that occur.  There’s an "Autopick Draft" option, in which the system automatically drafts players to each team and a “Keeper” league options where players can be carried over from the previous years.  There is also the most popular, “Live Draft”, which can take place Online with participants logged into the same website or Offline, perhaps at a single location where multiple owners will gather in-person to select their players in an actual draft.

During the “Live” drafting process, there is phenomenon that will inevitability occur at which point a “run” on certain position players happens.  Many drafts start out with the attention on RBs and QBs being selected followed by a wave of WRs (depending on the scoring).  However, maybe around the 4th, 5th, or even 6th round something extraordinary happens…..the first tight end (TE) gets selected. 

The TE is more of a niche position much like selecting a defense or even a kicker (well, maybe not a kicker).  There are only a few of really good ones and once the first gets selected, people usually react quickly or panic to make sure they’re positioned to get one of the good ones.

On June 24th, it was announced that Tenet Healthcare had agreed to acquire Vanguard Health Systems.  When the merger is finalized, Tenet will operate 77 hospitals in 30 markets, which includes Tenet's 49 hospitals in 24 markets and Vanguard's 28 hospitals in six markets.

Just a week later in a move of even greater magnitude, Community Health Systems (CHS) announced it will be acquiring Health Management Associates (HMA).  Now that the hospital operators in the on-again, off-again merger have decided to consummate their relationship, the two would create the largest U.S. hospital company by number of hospitals.  CHS will own and operate approximately 206 hospitals in 29 states with a total bed count of over 31,000 and be the No. 2 operator by revenue, with about $18.9 billion.

I’d like to suggest that in the healthcare industry, the “run” on TEs has begun!
Now that’s a bit of an exaggeration as a colleague pointed out, because these deals don’t take place over night and require significant due diligence to develop and come together. 

However, while hospitals are hoping for an influx of newly insured patients with health reform, they are also seeing cutbacks in government reimbursement such as Medicaid and Medicare.  Those cuts follow a trend of decreased patient volume, which has been seen as the aftermath to the recession but also representing efforts by insurers to reduce inpatient use.
Regardless of opinion, what is undisputable is that the hospital world is shrinking.  Healthcare futurists predict even more consolidation and a fewer number of hospitals as the way care delivery is provided continues to change.  In order to be successful in the future state, organizations are going to need to find the “right” partnerships and don't be surprised if there is a ripple effect as they’re going to want to make sure that they too.....have a really good tight end (TE).

Sunday, August 11, 2013

Fantasy Football and Health Insurance?

The NFL Preseason is in full swing and “arm-chair” quarterbacks all over are preparing for their own season, the 2013 Fantasy Football season.  Here's to hoping the amount of injuries that occur this year are minimal because without health insurance, the out-of-pocket costs could be significant.
According to a recent story published by NPR, Fantasy Football is the fourth most popular sport in the United States and more than 30 million people play it in the U.S. and Canada combined.  In fact, 13 percent of Americans played it in 2012 with the strongest demographic residing in the 25-34 age group.  Also, contrary to popular belief it’s not as gender dominated as many might assume.  In 2009, 12% of Fantasy owners were women according to Yahoo Sports research while in 2012, that number climbed to over 20% of the participants.

To give these numbers some perspective, consider that a 2012 report by the Census Bureau indicated that nearly 45 million people or 15.7% Americans were without health insurance during the previous year.  Of those, the biggest demographic was Americans between 25-34 years old with 28.4% of that age group without insurance according to CNN.

Long story short, it’s good thing that a relatively few number of injuries result from this "sport" because the United States has an awful lot of 25-34 year olds without health insurance playing fantasy football.



Lab Testing: August 31st

For my initial entry into the blogosphere, I share with you that my August 31st has arrived.  August 31st is the day of the 2013 NFL calendar on which all clubs must reduce their rosters to a maximum of 53 players on the active/inactive list. 

In other words, the NFL teams (the employers) inform their players (the employees) that the organization has to do some restructuring and as a result certain individuals will be cut or impacted.  This is usually accompanied by a speech from the head coach or GM stating something to the effect of “we’ve had to make some difficult decisions but feel that it’s in the best interest of the organization to be successful going forward”.

According to the latest monthly job cut report by Challenger, Gray & Christmas, Inc., the healthcare sector led July workforce reductions with 6,843 planned job cuts, the highest number of cuts in the industry since November 2009 when it slashed 9,558 jobs.

“Cuts in Medicare reimbursements brought about by sequestration and health care reform are hurting hospitals’ bottom line. Some states are also cutting Medicaid funding, which adds to the financial challenges. Hospitals are also reporting fewer patients as high-deductible insurance policies discourage would-be patients from seeking health services. As a result of these factors, health care providers, which had been one of the country’s best job generators in recent years, are being forced to reduce their headcounts,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.
 As hospital admissions keep declining and reimbursement continues to deteriorate, chances are, if you work on the provider side of healthcare long enough, you’ll know someone that will experience their August 31st too.