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A Conversation on Healthcare

Posted: October 18, 2013 12:11 p.m.
Updated: October 18, 2013 12:11 p.m.

Dr. Matteo Dinolfo, medical director of the UCLA Department of Medicine community offices.

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The Santa Clarita Valley Business Journal invited healthcare leaders to discuss ongoing work within their organizations now that the Affordable Care Act program is up and running nationally and in California – and how that impacts us all.

Joining us were Dr. Matteo Dinolfo, medical director of the UCLA Department of Medicine community offices, and Dr. Bernard Klein, MD, MBA, chief executive of Providence Holy Cross.

Now that covered healthcare is rolling out, Dinolfo and Klein provided very detailed insights as to what healthcare in the United States will look like.

Editor’s note: As the SCV Business Journal went to press, the United States government was still in a partial shutdown. Currently, some members of Congress are demanding a repeal of the Affordable Care Act, commonly referred to as Obamacare, in exchange for a repeal of, or changes to, the national healthcare program.


Given what’s going on with Congress, can the Affordable Care Act (ACA) be repealed at this point?

BOTH: No.

MATTEO DINOLFO: The country now spends 18 percent of its GNP on healthcare. That’s not sustainable.

BERNARD KLEIN: Today the average working American can no longer afford healthcare. This country is in crisis. We cannot afford to stay on this path. We have to do something different. We have to figure out a way to provide healthcare for the entire country.

It’s not going away. It’s here to stay.

DINOLFO: I don’t see this going away. It’s an evolution that is essential for the health of this country. I think this will make things much better.

KLEIN: It’s the most fundamental shift in healthcare since I’ve been practicing, by far. We are the only industrialized country that does not guarantee healthcare coverage. At this point, we don’t consider a right for every individual. We have the highest per capita cost. Amongst the industrialized we have some of the lowest quality results. It’s sad.

We will be better because of it. We’re already working harder than ever to improve quality and lower cost.

 

What financial cost has the ACA meant to the healthcare business? What has that meant in terms of investment?

DINOLFO: From our standpoint at UCLA, (the investment has) been hundreds of millions of dollars. We are just instituting a fairly sophisticated electronic medical record (EMR) system called Epic, it’s been online since June. And the cost will be somewhere around $350-400 million. We’re also as part of that expansion, we’ve expanded our care coordinators, and those are obviously costly. We’ve had to hire more staff to support this new electronic record. Everything is going to be linked and we’re expanding very rapidly.

There’s advantage for us because somebody in Santa Clarita can talk to somebody in Torrance. We think we will get that money back just in terms of our efficiency, but the upfront costs are expensive.

 

How many years did the company spend in preparation for this?

DINOLFO: My guess is its certainly been going on for at least four to five years,. There was a small team internally, then there was a large team. And when you go live, it’s an enormous undertaking. You need to have a lot of people who need to be over the shoulder of physicians and support staff. We’ve instituted a centralized call center for patients’ scheduling, and that’s all linked to the computer. There’s really no paper now.

KLEIN: I’ll first to speak to Holy Cross and then I’ll speak to the Providence region. Providence has been studying the Affordable Care Act for over three years now, similar to UCLA. We actually have an EMR, and we’re upgrading it to Epic, also. We’ve also installed Epic in our affiliated clinics in the community, and we’ve offered subsidizing for an EMR for physicians in the community who have chosen to participate in something called Providence Partner for Health, which is our clinical integration initiative.

So, there are a lot of costs in terms of implementing an EMR. The good news is that the government has given us subsidies if we meet certain criteria by a certain date. So the government did a pretty good job of offsetting most of those costs.

For Holy Cross, the big costs start now because we have a mission to care for the poor and vulnerable. We take care of a disproportionate share of the poor and vulnerable. And we’ve been able to get funding from the state and federal government to help offset that cost. It’s called DSH funding, for Disproportionate Share Hospital. And as part of the ACA, this month, our Medicare DSH care funding drops by 70 percent.

Medical starts going down more gradually over the next three years. You say then, ‘Well these people will have insurance.’ But what we’re finding is that the insurance doesn’t replace the DSH money dollar for dollar. We don’t really know what the cost is going to be, so for Holy Cross this is where the cost really starts to affect the mission of our hospital. There’s an unknown gap in the ability to pay for the services, and we provide the cost.

We’ve been lobbying our congressmen and women to delay the deep reduction in Medicare and DSH funding, but unfortunately our government isn’t exactly working well together, so we’re not optimistic they’ll be able to reach an agreement to delay the reduction.

 

When do you expect to recoup investments?

DINOLFO: That’s really hard to say. The law is very complex. The payment schedules are going to be very complex. The exchanges are complex. My gut feeling is at least five years to recoup — probably longer because the market is going to change because of this, as you see more and more consolidation. It may take longer (than five years). I don’t think anyone really knows how this is going to evolve.

California is a leader in this. It received $1 billion to implement it. It’s all in, so to speak, and there are more than 1,200 employees statewide trying to help people navigate these things. I think all that will go away — I think things will get a little bit smoother. It’s really going to be a sea of change — until people get used to this in their lives, things wont get settled. Much could change.

I don’t personally think that’s going to happen. I think it’s going to evolve. We’ll probably know more of how this is going to look in two to three years.

 

Do you have any projection as far as your ROI?

KLEIN: So what’s fascinating about the ROI question is that the ACA is primarily about insurance coverage; it has very little about reducing the cost of care. They do have some interesting innovation projects they have funded. But those are actually a minority of the entire ACA.

I don’t know if the ACA itself is going to have a return on investment. It should for the country, if you can get people insured, give them preventative care, and they get care before it gets to a life-threatening emergency. That will really save money.

Where you’re really going to start seeing a cost savings is when we start taking risk. When we start managing a population of patients and we take the risk. And if we do a great job and we have a great infrastructure... we should see healthcare costs go down.

We should all benefit from that and see a return on investment. And that’s a big “if.” Unless you’ve been doing this for a long time, it’s a lot harder than it sounds.

Providence is building an infrastructure by partnering with the community and other physician groups, so we’re approaching the same goal from two different directions. Our goal is to keep the care in the community and work with our physicians in the community as much as possible. I have no idea when we’re going to get a return on this hospital.

What I do know is that care is going to moving out of the hospital. It already is. What you’re going to have in the hospital is only the most sick patients, the obese and the deliveries. We’re going to see less and less care in the hospital. And so our job is to continue to provide high quality care while lowering the cost.

 

Describe how you will move some care out of the hospital.

KLEIN: It’s going to involve primary care, home healthcare, care in nursing homes, movement from hospital surgery to surgery centers. We’re going to see a big increase in care in other areas.

DINOLFO: Our model is an academic model. They have to teach. One of the mainstays of what we’re doing in our expansion is using local hospitals. In Santa Clarita, where we’ll have a major center in 2014-15, we’ll be using Henry Mayo hospital.

So we’re expanding, and we do take on physicians in the community, if they want to join a faculty model. It’s a slightly different model than Providence, but the end result is the same.

We feel that we’re going to a value-based conversation, I guess, where you do get paid based on how you perform, not necessarily just on how you treat the ill. I think the “widget” way that people have been paid in private practice where you do a service and get paid is going to slowly fade away. If you aren’t in the business of population management and keeping people healthy, then your practices are going to suffer because that’s where the scrutiny is going to be.

When I started this, about 70 percent of physicians in this country were with some sort of group; they’re not in private practice. And I expect to see that number go up. Larger groups have the financial ability to change with these pretty dramatic changes.

KLEIN: I’ll give you a quick example: bundle payments. Currently if you need a hip or knee replaced, you go to your primary care doctor, and you get a pre-operative evaluation. The doctor sends you a bill. You go to your surgeon, and they schedule the case. They send you a bill. You get a bill from the hospital. You’ll get one from the anesthesiologist and the radiologist, and if you get rehabilitative services, you’ll get another bill from that.

In a bundle payment model, you pay one price, and it covers your pre-op and 30 days post-op, including any re-admission. That is the type of model we’re moving to for procedures. Providence is working on one.

 

If you’re moving toward managed care of a population, can you manage costs by managing care of a patient? Will that result in savings for you and the patient?

KLEIN: The way you’re successful in doing this is you work toward evidence-based standardized care across you’re entire system. If I have diabetes and go to a center for treatment in Torrance or Santa Clarita, I know every time I go in there I’m going to get checked for everything I need to be checked for with diabetes. They look at my feet and check that my vaccinations are up to date. Then you get the same care when you walk in to an office in Mission Hills. That’s what we’re all striving for, and that’s where the patient is going to win.

Whether the ACA stays or gets delayed or repealed, which is not going to happen, the winner down the line is going to be the patient. We’re moving toward a value-based, outcome-based system. We’re carrying the risk. We’re responsible for the patient and the population. It’s our job to work with our doctors and provide evidence-based standardized care where appropriate.

DINOLFO: I think the benefit of a large group is that we scrutinize our physicians pretty heavily. There’s a large body of evidence for almost every malady and how it should actually be treated, with a lot of evidence behind it. So if you’re an outlier as a physician, you better have a good reason for why you’re doing that because the body of medicine tells you that the best care is something else, in a finite way. Or you, at some point, need to refer them to a specialist.

One of the benefits of a system like Epic is that it’s a tremendous data tool. Doctors have to practice on what the standard of care is nationally. And it’s hard to do that unless you have the ability to be able to manage large populations. You have to be able to stratify risk.

One illness or accident could change your life. I think having young, healthy people insured early and having them understand the value of care is important nationally for us. This is not a bad thing. Insuring more people, having them have access to care, not being rejected because you have some pre-existing condition. That’s a phenomenal thing.

Is it a perfect law? No, it isn’t, by far. But is it something that we need as a country to evolve to? Absolutely, we do.

The cost savings will be as we manage patients nationally. The federal government can’t price fix under this law. That’s been delegated to the states. So you’re going to have a lot of play within the states.

 

Will the private care practitioner for primary care eventually disappear altogether?

KELIN: I think there will always be a market for primary care doctors to be indepedent, especially in some niche market. But the reality is, more and more physicians are moving into groups or finding a way to affiliate in a group-like way. It reduces and spreads out the cost. EMRs are very expensive and you can consolidate your offices to reduce the overhead.

The physicians coming out of school these days are looking more toward a predictable lifestyle. Unlike the guys and gals from the old days, who made medicine their lives, they’re looking for a way they can practice and make a decent living but have some predictability in their hours. And so you’re seeing this shift, not only because of healthcare reform but also a change in generational desires and values.

There was a speaker at my medical staff retreat last year who opened with: Private practice is dead. More than 70 percent of my business still comes from private, individual doctors. Large purchasers of healthcare don’t want to deal with one- or two-man shows. They want to go to one entity, contract and have it all be done. The only way to do that is to have size. Which means physicians need to affiliate and align with larger entities, so they can get a larger piece of that pie.

 

Because of cost, some people have long delayed healthcare. How do handle that risk?

DINOLFO: Well if you bring enough, you can certainly absorb those risks because you have enough physicians to see those patients. I don’t think that will be a major problem for us because we have the capacity. And as we expand, so will our capacity.

Any time people can access care early, we can make sure they are managed in state-of-the-art care. That’s good for the health of the country. The costs will go down down based on population health maintenance.

It’s simple things like vaccinations. If you vaccinate children early, they don’t end up in the hospital. That diminishes cost to the nation, not just to the family. Plus it’s the right care. Anything you can prevent is the right way to do it. We need to be able to manage the prevention of illnesses. That’s where we’re moving.

We manage that early, and the costs will definitely go down because we have a healthier population. Lifestyles will be healthier for the next generation. That’s our responsibility as physicians in a managed care setting.

We’re the larger organizations, and we’re going to take full risk. That’s why we’re moving to be large enough to have more members to be able to offer our own plan.

KLEIN: We already see those patients right now as a hospital. We cannot turn away anyone that walks in our door. We see patients who didn’t receive care before, and as a consequence, they walk in our door in full kidney or renal failure. If they had received treatment earlier, that could have been avoided. We see a fair amount of trauma that tends to be low-pay or no-pay patients. With preventative treatment, we may have been able to prevent those admissions. It’s unfortunate. So we’re already paying the price, if you will. But that’s our mission, and we will continue to do that.

DINOLFO: That’s exactly right. That’s the right thing to do, as physicians.

 

Will Covered California serve as a litmus test for the rest of the country?

DINOLFO: Yes. If it works here, then other states will see it as a functional organization. California was all in from the start by accepting large a large federal grant to implement it. It’s not going to be perfect, but when you have 1,200 people helping others navigate a very complex system, we’re going to be way ahead of the curve. You’re going to see very positive changes in California that you may not see in states that chose to initially opt out.

It’s not going to be repealed--that’s my personal feeling. When people really understand this law, they will see it as a good thing. The major provisions of this are all positive for anyone who been denied by the healthcare market. To insure your family will be pretty phenomenal. I don’t see any downside to that.

Obviously small businesses can face penalties, but those have been offset. The Obama Administration has made it pretty clear by the delay that this is our first go, so they backed off a bit.

 

Are there still a lot unknowns for your organizations?

KLEIN: There are a lot of unknowns. We don’t know what the impact will be. We don’t know if our ERs will be inundated by uninsured people. So we’re preparing for that and developing contingency plans. we aren’t sure about the reimbursements either. We’re just starting to see some of the numbers ourselves.

California is a great litmus test. The biggest challenge for L.A. will be access to care. Are there going to be providers available to care for the newly insured population? The suburbs are great becasue, generally, we have a higher level of coverage in the suburbs. When you get into the city, there may not be enough physicians to take these patients. And will the reimbursement rate be enough to have physicians and hospitals want to participate in the exchanges? That’s the big unknown I think.

Are there going to be enough primary care physicians to take care of people, especially in certain sections of the San Fernando Valley with the largest amount of newly insured patients? Will people be willing to take care of them? Are the reimbursements going to be there so they can survive? That will really test the implementation.

 

It’s such a dichotomy. Medicine is about taking care of the patient; it’s about the Hippocratic Oath. But by the same token, today medicine is a business. You have to be able to pay your own bills to provide care. In some of those dense pockets where there is a lack of physicians, and that could become a crisis.

KLEIN: It already is.

DINOLFO: I’m pretty fortunate because, as part of our expansion, I get to recruit. A lot of our trainees that would go to Providence or Kaiser are now being hired by us. I can expand pretty much indefinitely from our own training program. From an institutional healthcare system, UCLA is in good shape because we have a lot of training sites.

 

Describe the thought behind UCLA spreading out?

DINOLFO: In a sense, we’re bringing UCLA care to all these outlying communities. You can’t do that by having all those patients trek to Westwood or Santa Monica. The idea as to use our own hospitals and our physicians to keep care in these communities. So, ultimately, we can take full risk.

One center won’t work for us. We need to be bigger. We think there will probably four of five major survivors when all this fleshes out. We think we’ll be one of them, and that’s part of our overall strategy.

We do have a lot of patients from this community that do travel to UCLA. That’s going to stop. But we’ll also draw from a large new population of patients that we wouldn’t see otherwise.

We’re seeing a trend. We opened our first office in Westlake just a year ago, and it’s basically full.

 

Santa Clarita grew so rapidly. There were very few physicians out here a decade or two ago. Many residents drove to San Fernando Valley and Los Angeles to see doctors. We’ve been a desert within a desert, and this really opens up options.

DINOLFO: You’re going to have three options now: UCLA, Providence and Kaiser, as well as some private physicians.

KLEIN: You can see a significant difference between the three of us. Kaiser is generally a closed system. UCLA is using their brand to recruit and attract physicians in UCLA-branded areas. Providence is partnering with physicians who are well-known in the community, such as Facey Medical Group.

It’s three different strategies with the same end point: to provide quality care across a large geographic region.

Kaiser has driven its custmomer base to it by offering its own insurance. Are you considering that?

DINOLFO: Absolutely. As we become larger, we will look at our own healthcare costs. This has been thought of for many years. It’s now going to be implemented with just employees. We have a large customer base throughout the state.

I think we’re evolving toward that. Taking full risk means that you have a product that you sell and you manage populations. All this sets up to do that.

The governor just signed a bill in California that allows pharmacists to order certain tests. How do you see that fitting into this?

KLEIN: SB 493 allows pharmacists, in collaboration with physicians and other caregivers, to perform patient assessments, order and interpret lab tests to monitor patient progress, adjust the patient’s prescription when necessary and medically appropriate and discontinue medications that are duplicative, unecessary or life-threatening to a patient.

Pharmacists are very highly educated, very skilled individuals. In the acute setting, we’ve used them. I was always grateful for pharmacists. They’ve shown their value over and over again. There is a shortage of primary care physicians, so we’ll need more physician extenders. They’re going to have to play a larger role.

The role of the primary care doctor will have to change to be more like the captian of a ship. Extenders will take care of some of the things that you don’t need a physician to do.

DINOLFO: I’m very biased because my wife is a clinical pharmacist. This is going to be very beneficial. They bring an entirely different way of looking at care. The skillset they have is just so invaluable. A lot of that burden will be taken away from that physician.

KLEIN: The vast majority of us believe this is a good thing.

DINOLFO: If you want to deliver good care, you really have to take a team approach.

 

How will this help reassure patients who are nervous about a disconnect in their care?

DINOLFO: That’s the beauty of a large system that’s integrated. You have to be big, with all that infrastructure, to be able to do that ... You don’t have that with a private practice. From a patient standpoint, you want to be in that system.

KLEIN: You want to provide integrated care but not lose that personal touch. Patients want to feel like they’re not just part of a system. A primary care doctor is the center and the key of any team model.

Care will be higher quality, lower cost, and it should generate better outcomes.

 

Why did UCLA identify Santa Clarita as a market?

DINOLFO: We looked at demographics to find where there was a need for our particular model. We had a track record of where we do well. We also looked at areas that would be attractive for our physicians to live and work in.

Is the model changing or evolving for Providence?

KLEIN: It is definitely evolving for the ACA and for Providence. We’ve affiliated with Facey Medical Group and started something called Providence Partners for Health, which is our clinical integration initiative. It’s a limited liability company half-owned by the physicians and half-owned by Providence, as well as a physician-driven board of managers to improve satisfaction and lower cost. It’s a way that doctors can align with us. Today we have approximately 900 individual doctors. You get the power of size and expert-to-expert communication.

Facey will continue to thrive as a stand-alone group, but we are working together to share our best practices.


This story published in the Santa Clarita Valley Business Journal which can be viewed at www.signalscv.com/scvbj/.

 

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