Incentives for Public Hospitals a Microcosm of Reform Goals

It has been a busy year for the Arrowhead Regional Medical Center in San Bernardino.

The facility, 60 miles east of Los Angeles, has been adding internal medicine residency slots, building a new clinic, updating its disease registry, expanding specialty care capacity, launching the medical home concept, creating new stroke and diabetes care management programs, starting a redesign of the primary care system, and establishing baseline data for a plan to reduce hospital-acquired ulcers and infections. All of that is part of laying the groundwork for a total redesign of the medical center’s care delivery model.

Arrowhead is one of 17 public hospital systems in California, all of which are going through a similar transformation.

As part of a five-year incentive plan laid out in last year’s Medicaid waiver, public hospitals in California are trying to completely revamp how they do business and how they approach patient care.

It appears to be working. California’s public hospitals now have finished the first year of the five-year plan, and each one met initial milestone goals.

The hospitals’ efforts earned them a total of $600 million in additional federal payments. If all of the hospitals hit their goals over the life of the plan, it could mean a grand total of $3.3 billion in federal incentive money.

The changes in California’s waiver represent the kind of system transformation federal officials hope to see across the country under national health care reform. In California public hospitals, it’s happening four years ahead of schedule.

“This is getting in there and doing the kind of foundational change everyone else has been talking about,” Melissa Stafford Jones — president and CEO of the California Association of Public Hospitals and Health Systems — said. “And it’s happening in our public hospitals now.”

July marked the start of the second year of the incentive plan, and this is where the effort starts to get progressively more difficult and complicated, as hospitals try to improve on a number of fronts, all at once. But that’s the only way to really change the system of care, according to Stafford Jones.

“This kind of transformational effort has the public hospitals excited and challenged and sometimes daunted,” she said. “This is the work. It’s what needs to happen.”

Transforming Care

Neal Kohatsu, medical director at the California Department of Health Care Services, said public hospital efforts touch on many of the basic tenets of health care reform.

“It’s important because it has a major focus on medical quality and patient outcomes,” Kohatsu said. “And we will be able to see measurable outcomes; that’s very important. It is comprehensive reform, in that it is taking a system approach.”

There are four domains of reform, Kohatsu said. Hospitals have new goals every year under each of those domains, for each of the five years. In general, the early years tend to be more associated with the tasks in the first two categories, and, generally, those tasks increase in each of the following years:

  • Infrastructure: Expand primary care capacity, with the addition of primary care clinics and providers; enhance disease registries; expand specialty care, such as diabetes educators.
  • Systems and care delivery redesign: Implement electronic health records and the medical home model; design chronic care management systems; redesign the primary care experience and systems; reduce wait times and improve follow-up care.
  • Population health management: Focus on system capacity; track 21 required population health metrics.
  • Inpatient hospital safety: Reduce hospital-acquired infections, such as sepsis; institute stroke management care.

“When you combine all of that,” Kohatsu said, “you get a comprehensive, inpatient and outpatient approach with specific milestones and specific measurable metrics along the way.”

Kohatsu said one of the attractive qualities of national health care reform is its systemwide approach. For years, public hospitals and other medical institutions have talked about how care should be different; however, because so many medical systems are interrelated, it’s ineffective to target them one at a time.

For instance, you can’t redesign the primary care experience without putting EHRs in place, and it’s more difficult to reduce in-hospital infections if readmission rates are high.

“It’s all critical, it all fits together,” Kohatsu said. “We’re looking at improving the health of all Californians, and that means greater cultural competency, more access to care, more affordable cost of care.”

That also means coordination between hospital systems, he said, as one medical center takes on a pilot project to reduce readmission rates, and another forms care teams to be assigned to each patient.

“We’re all trying to learn from one another,” Kohatsu said. “Some things are happening now, tools are being developed now, and other states have been giving us some ideas about how to manage care.”

Infrastructure improvements made up a lot of goals in the first year, he said. “Infrastructure is the most straightforward of the goals,” Kohatsu said. “Each of the other areas has its own challenges. That’s why we’re trying to think of it as a system of 17 hospitals. And in doing that, we get the picture, clearly, that health care is local.” Hospital systems in more rural areas, such as Arrowhead in San Bernardino, might need a little more input from the more urban centers, he said.

“The experience [with reform systems] is not level across geographic levels, and some of that is related to proximity to universities,” Kohatsu said. “Given that the playing field is not level, we need to look at what we can do to facilitate communication … and work with academic partners in the UC system.”

DHCS is revving up its resources to help public hospitals during year two, Kohatsu said, as the plane of difficulty rises.

“We’ll actually be going to specific hospitals, identifying the barriers, given the assessment of hospital needs,” Kohatsu said. “We need to ask how we can help, and it will be a formalized back and forth. That’s an essential piece here, because each [hospital system] is an endless source of good ideas, so we’ll be sharing best practices, and helping facilitate that dialogue.”

Now Is the Time

According to Stafford Jones, this redesign is a chance that the state and its public hospitals don’t want to pass up.

“This is an unprecedented opportunity to make real, on-the-ground progress,” she said.

Right now is a critical time for public hospitals, Stafford Jones said, after the groundwork for reform was laid in the first year.

“The start of the second year marks the next major phase of work, and that’s monitoring and achieving a variety of milestones,” she said.

“It’s tricky, because each hospital is moving the ball forward within each category simultaneously,” Stafford Jones said. “No part of the system is untouched by this.”

“We’re still very early on,” Stafford Jones said, “but I think all of the public hospital systems are focused on thinking about this in a thoughtful, comprehensive way. They’re all really thinking about the greatest needs of their patients, and finding the programmatic components to meet those milestones. It is intense, and it is systemwide.”

Stafford Jones pointed out that public hospital systems have been working on a series of pilot projects over the years before any of this started. “Reducing readmissions, cutting down on wait times, many public hospitals have been involved in one or more of these,” she said.

“So we didn’t start the incentive program from a slate of no experience, we weren’t starting from scratch with these programs. It’s just that, now, it’s on an unprecedented scope and scale.”

Kohatsu said the first year won’t define the success of the program, but it might give some strong indications about how much public hospital systems in California can accomplish.

“I’m confident we’ll be pulling in the same direction, but it’s impossible to predict the trajectory,” Kohatsu said. “There is certainly commitment from everyone, and we all have a vested interest in pulling in the same direction.”

The rest of the country, he said, has a vested interest in following what happens here.

“That’s why everyone’s looking to California,” Kohatsu said. “The optimum, of course, is that all hospitals show a high level of performance. We will soon know over the coming year or so if we can do that.”

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