SPRING 2014 The Blue Ridge Academic Health Group Report 18. A call to lead: The case for accelerating academic health center transformation 1 Reproductions of this document may be made with written permission of Emory University’s Robert W. Woodruff Health Sciences Center by contacting Anita Bray, James B. Williams Medical Education Building, 100 Woodruff Circle, NE, Atlanta, GA, 30322. Phone: 404- 712-3510. Email: abray@emory.edu. A call to lead: The case for accelerating academic health center trans- formation is the 18th in a series of reports produced by the Blue Ridge Academic Health Group. The recommendations and opinions expressed in this report represent those of the Blue Ridge Academic Health Group and are not official positions of Emory University. This report is not intended to be relied on as a substitute for specific legal and business advice. Copyright 2014 by Emory University. 2 REPORT 18 • SPRING 2014 MISSION: The Blue Ridge Academic Health Group seeks to take a societal view of health and health care needs and to identify recommendations for academic health centers (AHCs) to help create greater value for society. The Blue Ridge Group also recommends public policies to enable AHCs to accomplish these ends. Members and participants (August 2013 meeting) MEMBERS FEATU RED PRESEN TERS S. Wright Caughman, MD* Dick Krugman, MD Executive Vice President for Health Affairs, Emory Dean, School of Medicine, University of Colorado University; CEO, Woodruff Health Sciences Center; Chairman, Emory Healthcare Chris Larsen, MD Dean, School of Medicine, Emory University Don E. Detmer, MD, MA Professor of Medical Education, Department of Public William B. Rouse, PhD Health Sciences, University of Virginia Chair, Economics of Engineering, School of Systems and Enterprises, Stevens Institute of Technology Michael V. Drake, MD Chancellor, University of California at Irvine David Spahlinger MD Senior Associate Dean for Clinical Affairs & Executive Michael A. Geheb, MD Director of the Faculty Group Practice, University of Executive Vice President, Physician Planning and Michigan Operations; President, Oakwood Physicians, Oakwood Healthcare, Inc. Gary Gottlieb, MD, MBA A D V ISERS President and CEO, Partners HealthCare System, Inc. Steve Levin Michael M. E. Johns, MD Director, The Chartis Group Professor, Emory University School of Medicine and Rollins Greg Maddrey School of Public Health; former Chancellor and former Director, The Chartis Group Executive Vice President for Health Affairs, Emory University Darrell G. Kirch, MD President, Association of American Medical Colleges IN VITED PA RTICIPA N T Steven Lipstein William N. Kelley, MD President and CEO, BJC Health Care Professor of Medicine, Perelman School of Medicine, University of Pennsylvania Mary D. Naylor, PhD Marian S. Ware Professor in Gerontology and Director of NewCourtland Center for Transitions & Health, University of Pennsylvania School of Nursing STA FF Anita Bray Kenneth S. Polonsky, MD Project Coordinator, Woodruff Health Sciences Center, Executive Vice President for Medical Affairs and Dean, Emory University Division of Biological Sciences & School of Medicine, University of Chicago Gary L. Teal Chief Administrative Officer, Woodruff Health Sciences Claire Pomeroy, MD, MBA* Center, Emory University President, Albert and Mary Lasker Foundation Mark Richardson, MD Dean, School of Medicine, Oregon Health & Science ED ITOR University Jonathan Saxton, JD Arthur Rubenstein, MBBCh Policy Analyst Professor of Medicine, Perelman School of Medicine, University of Pennsylvania ED ITORIA L A N D D ESIG N CON SU LTA N TS Fred Sanfilippo, MD, PhD Karon Schindler Director, Emory-Georgia Tech Healthcare Innovation Peta Westmaas Program, Emory University Emory University John D. Stobo, MD Senior Vice President, Health Sciences and Services, * University of California System Co-Chair Irene M. Thompson, MD President and CEO University HealthSystem Consortium Bruce C. Vladeck, PhD Senior Adviser, Nexera Consulting Steven A. Wartman, MD, PhD President, Association of Academic Health Centers Contents A call to lead: The case for accelerating academic health Report 18. center transformation Executive summary of recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Unprecedented structural changes in the economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Impact of the Great Recession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Impact of the Affordable Care Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Impact of the Sequester . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Unanticipated structural changes in health care spending . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Ready or not . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Leading change in academic health centers (AHCs): A world of complexity . . . . . . . 12 Are AHCs trapped by their competencies? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Defining the future of the AHC clinical enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Defining the future of the AHC science enterprise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Multiple options—one imperative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Leadership needed to effect enterprise transformation . . . . . . . . . . . . . . . . . . . . . . . . 19 Focus on value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 How leadership can succeed in catalyzing value-based enterprise transformation . . . . . . . . 23 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Pathways to AHC transformation: Examples from the field . . . . . . . . . . . . . . . . . . . . . 25 Restructuring decision-making: University of Michigan Medical School . . . . . . . . . . . . . . . . . 25 Integrated approach to hiring: University of Pennsylvania School of Medicine . . . . . . . . . . . 28 Nontraditional partnerships: University of Colorado Health System . . . . . . . . . . . . . . . . . . . . 28 The future of accountable care: Emory Transplant Center . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Thorough engagement in accountable care: Partners Healthcare . . . . . . . . . . . . . . . . . . . . . . 32 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 About the Blue Ridge Academic Health Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Previous Blue Ridge Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38 Executive summary consistent with the following: Areas of greatest benefit aligned with the n Unprecedented economic and policy forces are organization’s mission and strategy restructuring health care and insurance markets. Human and capital resource availability and n Academic Health Center (AHC) leaders face partnerships critical challenges in developing a comprehensive n Align compensation and rewards with resource vision and leading its implementation in their availability and performance toward new insti- organizations. The challenges reflect the fact that tutional goals and individual goals. AHCs are complex adaptive systems that can- n Accelerate team-based care models and use as not be effectively changed through traditional a platform for patient-centered, team-based command-and-control management approaches. learning and discovery model development. This report offers an analysis of these challenges n Leverage shared education infrastructure and and then summarizes recommendations for how curricula across medical, nursing, and other leaders can approach and achieve enterprise health professions schools as well as host uni- transformation by building new platforms on versities. which AHCs can serve their vital roles in their n Accelerate development of collaborative ap- local communities and across our nation. Lessons proaches to research, including building on the learned from five examples of initiatives currently model of multi-AHC Clinical and Translational under way at AHCs reinforce the recommenda- Science Awards. tions proposed to accelerate needed transforma- n Consider nontraditional research partners and tion. funding sources (being cognizant of financial impact), with attention to conflict-of-interest rules, which may need to be modified to lessen Recommendations constraints. n Develop a community-engagement strategy to Approaches/strategies understand local needs and resources and to n Define the urgent case for change, and commu- involve potential partners. nicate the case, clearly delineating why this time n Foster and cultivate diverse leadership across is different. the AHC to help enable change. Present the qualitative and quantitative data n n Advocate for the unique and indispensable mis- to facilitate evidence-based persuasion. sion of AHCs in the integration of education, n Engage key internal and external (especially clinical practice, and research. local community) constituencies in defining a Work with policymakers to find appropri- n unique vision and value proposition that reflect ate and equitable mechanisms to pay for the organization’s mission, role, and current added costs of AHC education and research realities (including resources available, partner- functions that benefit the health care sector ship opportunities, and competitive environ- as a whole and that will remain embedded in ment), while maintaining focus on advocacy for AHC cost structures. the organization. n Define and use metrics that demonstrate the Structure and operations value proposition to the communities served n Understand, make transparent, and communi- and that reflect the organization’s mission. cate sources and uses of investment capital. n Apply lessons learned from redesigning clinical n Understand, make transparent, and commu- processes to transform academic programs. nicate internal funds flow and economics, par- n Identify and eliminate administrative and in- ticularly amounts and approaches to internal frastructure redundancy using performance- investment. improvement processes based on desired n Shift decision-making to optimize enterprise outcomes. performance across all missions, and make the n Size the missions based on maximizing value 2 whole better than the sum of the parts. Em- power the organization with the following: Share decision-making and accountability n for overall performance. Define boundaries of autonomous decision- n making by departments. Limit risk to departments in areas where they don’t have authority or accountability. n Re-envision roles and expectations of de- partment chairs. n Delineate balance of authority for decisions about strategies, investments, and metrics. Integrate enterprise performance and assess- n Academic health ment across all mission components. Communicate integrated decisions and associ- n ated benefits to gain engagement across the center leaders face AHC. n Reduce the internal “regulatory” burden of critical challenges institutional bureaucracy. in developing a Culture and people n Discover, articulate, and gain agreement on comprehensive vision new attributes, values, and leadership skills required for success for chairs, other adminis- trators, faculty, and staff, including the ability and leading its to make decisions in face of uncertainty and to embrace change. Build trust. Identify and implementation dispel myths. n Conduct an assessment of organizational culture. in their organizations. Develop, promote, and recruit to fit with n desired attributes and culture. Create or sponsor leadership skills-develop- n ment programs. Develop incentives and success metrics con- n sistent with new attributes and culture. n Empower and reward change agents, risk tak- ers, and others who exhibit the desired attri- butes and culture. n Celebrate new values, successes, and benefits of new strategies. Learn from failures. 3 Introduction leading the changes necessary to achieve a value- driven health care system. In August 2013, the Blue Ridge Group met to “Because things are the way they are, things will not stay assess whether and to what extent the health care the way they are.”—Bertolt Brecht and insurance marketplaces are indeed moving to- ward a value-driven health system and whether and “Change before you have to.”—Jack Welch to what extent AHCs are rising to the challenges of leading and innovating in this new environment. The Blue Ridge Academic Health Group has long On the basis of data presented by a range of experts advocated for nationwide health care reform that and representatives of major AHC and health-relat- could lead to the establishment of a value-driven ed organizations, the following has become clear: and evidence-based health care system that “pro- n Many health care and insurance marketplaces are motes the health of individuals and the population already changing, catalyzing the reorganization by providing incentives to health care providers, of care delivery and payment mechanisms. payers, communities, and states to improve popula- n On top of restraints on the growth of health tion health status and reward cost-effective health expenditures caused by the Great Recession3 that management.”1 The Blue Ridge Group saw the pas- began in 2007, traditional sources of federal rev- sage of the Patient Protection and Affordable Care enues that support AHC missions are being fur- Act (ACA) as a determined step in this direction ther reduced by the Budget Control Act of 2011 and in April 2012 issued a special report identify- (BCA). Specifically, Sequestration has resulted ing compelling near-term opportunities and critical in structural, and long-term health expenditure challenges for academic health centers (AHCs) and reductions, outside of the periodicity of normal their partners as the ACA is implemented. Build- economic downturns. In addition, state funding ing on many past reports recommending pathways has fallen, while philanthropic support has been for leadership and innovation in the critical AHC flat. missions of education, research, community en- n Changes in practice patterns and in insurance gagement, and clinical care, the Blue Ridge Group coverage are also contributing significantly to a recommended that the AHC community act with a slowdown in health care spending; strong sense of urgency in leading the transition to Of additional concern is stark evidence from value-driven health care. The overarching impera- the front lines of organizational change manage- tive for AHCs was perhaps best summarized as ment about the following: follows: n The AHC community overall (with some excep- . . . [N]ow through the ACA . . . our nation has adopted tions) has not taken responsibility for modeling a framework designed to achieve near-universal cover- and leading the change or innovation necessary age and move toward a value-driven health system. to achieve a value-driven health system. AHCs AHCs, as the font of leadership in academic medicine, have shown great resilience over the years in must resolve to become accountable and to lead in adapting to various environments for care, and championing the future of a value-driven, accountable they continue to find success by providing health health care system. This will be a daunting task. AHCs services in traditional ways. But most fall short of will have to commit to transitioning from being centers providing an integrated, patient-centered experi- of very special interests and exceptional individu- ence and in adopting accountability for value in als and individual programs to becoming ever more their processes and metrics. As a whole, AHCs integrated systems, as well as full community and are behind their local and regional community- national partners in creating our value-driven health based health care organizations in transition- care system.2 ing to patient-centered and value-driven care The essence of this recommendation was the models. need for the AHC community not only to under- n AHCs maintain their critical roles in basic sci- stand and adapt to fast-changing realities but also ence and clinical research and in health profes- to take significant responsibility for modeling and 4 sions education but have uneven track records ed health providers and systems, and premium in advancing and sustaining innovation in the pricing. But the confluence of a major recession organization and conduct of these roles. The re- and austerity measures, along with changes in the search enterprise especially has become a major insurance market and underlying health care cost cost center in many places. growth factors, is creating a new environment for n There is much uncertainty about how well AHCs health care characterized by unprecedented and in general are prepared for the leadership and sustained slowing of the rate of heath spending. management challenges of catalyzing needed As many health providers and systems are already change and innovation throughout their organi- “wheels-up” in adapting and leading the transi- zations. tion to accountable care, there is reason to worry n A large body of evidence clearly demonstrates whether much of academic medicine could run out that when enterprises fail to evolve and innovate of runway before getting critical transition pro- over time, the vast majority of them fail when cesses off the ground. finally forced to make large changes to their AHCs have special characteristics that have businesses or organizations.4 This is one reason helped them be centers of innovation and progress that Jack Welch, the legendary CEO of General in health care but that also make them difficult to Electric, often repeated the admonition, “Change manage, let alone change. Herein, we offer an as- before you have to.” sessment of the challenges AHCs face in the emerg- These findings raise fundamental questions ing environment and a roadmap to preparing for for all of academic medicine: Faced with national and undertaking the changes and leadership that policy and related private sector dynamics bringing the transition to accountable care requires of us. unprecedented changes to health care and insur- ance, how well equipped are our AHCs to under- take the system-wide transitions necessary to be Unprecedented structural changes successful in this environment? Having spent the past two decades mostly focused on growing capac- in the economy ity and negotiating premium pricing, can AHCs change to being leaders in the new paradigm for Impact of the Great Recession accountable care? Between December 2007 and June 2009, the The answers to these questions are not easy or United States suffered its longest and worst eco- obvious. The following pages describe a changing nomic recession since the Great Depression.5 The environment that presents unprecedented challeng- years since have seen a relatively slow and spotty es for AHCs, from the need to integrate health care recovery. Altogether, Americans lost more than delivery, to revolutionizing educational programs, $16 trillion in household wealth to the recession. reorganizing or rethinking the research enterprise, The average U.S. household has recovered only meeting community needs, and ensuring that 45% of the wealth it lost during the recession.6 changes in the financial obligations and risks asso- The major significance for health care is that, ciated with AHC success continue to be compatible rather than being a typical bust and boom cycle, with the larger university missions of which they this recession was so deep that recovery will take are a part. Absent near-term strategic mission- and far longer than in other recent recessions (see fig- market-driven initiatives, AHCs could well find ure 17). Leading health economists have recently themselves unable to fulfill crucial missions in the estimated that the recession’s depth and lingering longer term. impact already are responsible for about $185 It is true that AHCs have been adaptive over billion in reduced health expenditures from 2007 the years. AHCs adapted well and gained much to 2013.8 Because of political gridlock, it is likely momentum during the past several decades of that the recovery will continue to be slow through market conditions that favored growth, local and at least the next two election cycles and perhaps federal “favored nation” status for university-brand- beyond. For AHCs, another major impact of this deep 5 Figure 1. The worst recession7 Indexed job loss for prior four recessions 100% 1981 recession 1990 recession 2000 recession Share of total jobs, start of recession = 100% 99% 98% 2007 recession 97% 96% 95% 94% 93% 0 2 4 6 810121416182022 242628303234 3638404244464850525456586062646668 Months since recession start Note: The line for each recession begins at the official start of the recession, so the length of the line to the left of zero indicates the length of each recession. Source: Economic Policy Institute (EPI) analysis of Bureau of Labor Statistics Current Employment Statistics. Reprinted with permission from EPI’s stateofworkingamerica.org. and lingering recession is that it creates underly- ally understand how to weather cyclical down- ing uncertainties that could incline AHCs to avoid turns and have shown historically that they are financial risk and needed capital investment. It flexible enough to make necessary adjustments. might also have an adverse effect on the financing A recession alone, even one as severe as this one, of recent and in-progress capital improvements, would not prove to be an insurmountable hurdle leading some AHCs to become over-leveraged. for most AHCs. This economic climate makes planning difficult The ACA, however, adds a new set of challeng- as leadership struggles with everything from the es for AHCs. Not since the enactment of Medicare effects of mounting student debts and deferred and and Medicaid has national policy been adopted delayed demand for educational and health services that will catalyze nationwide and system-wide to revenue reductions and limits on debt financing. changes in health care practice and financing. The ACA is designed to drive new accountable Impact of the ACA care models and mechanisms in the public and The vagaries of the underlying economy are just private markets for health care and insurance. It that: economic episodes and cycles that generally is designed also to inform consumers and engage occur often despite public policy and for which people in their health care and in making bet- our political economy has developed a variety of ter choices in health care-related spending. And mechanisms to aid in correction and recovery. in the end, in addition to improving health, the And while the current recovery is proceeding goal is also to reduce the overall rate of growth of slowly, the public policy aim is to return the national health spending. economy to health. AHCs and universities gener- One example of a near-term development that 6 could change things very fast in our environment tinct choices.10 Additionally, and relevant especially is the new state-based insurance exchanges. to providers, exchanges can be empowered to set standards for the quality of care paid for by plans, State insurance exchanges = changes to deny participation in the exchange to plans that The ACA is full of provisions and powers specifi- do not meet quality or price standards, and to cally designed to address health care cost growth selectively limit participation in the exchange to through reform of the health insurance market, providers that meet these standards. while reorganizing the ways in which most health Exchanges can have the further power to limit care is both provided and paid for. (See box for a the insurance policies that can be sold outside of summary of key provisions.)2 (p6) Already un- exchanges or even to require that all health insur- der way are a large number of pilot programs, ance policies for individuals and small businesses experiments, and demonstration projects test- must be sold within the exchange itself (as a way, ing bundled payments and other new methods for instance to head off insurers’ abilities to bifur- of paying for care.9 Also cate the marketplace by being piloted are various offering plans inside the ex- forms of accountable care change designed for sicker organizations (ACOs), Five key provisions patients, etc.).10 The District primarily through the of the Affordable Care Act of Columbia and Vermont Centers for Medicare and 1. Coverage expansion have already chosen to set Medicaid Services (CMS). 2. Insurance market reform such limitations. Also avail- What may be less well un- 3. Payment and delivery reform able to exchanges will be derstood or appreciated is 4. Quality and safety improvement the capacity to provide and the powerful role that the 5. Cost control promote information about insurance exchanges are provider quality, outcomes, set to play in the transi- and cost to consumers and tion to accountable care. the public. As of October 1, 2013, every state was re- The era of the exchange ushers in direct quired to have implemented an insurance ex- provider engagement in becoming publicly re- change run either by the state or federal govern- sponsible for “owning” the care and outcomes for ment. The federally administered exchanges got patients: for being accountable. off to a particularly inauspicious start caused Insurance exchanges are going to play key by serious deficiencies in the online enrollment roles in restructuring state health insurance system. Nevertheless, as these are sorted out, the markets. In turn, they also will play key roles in new exchanges are expected to catalyze not just moving providers to retool their care delivery significant changes in employer-provided insur- processes to meet new standards for quality, out- ance but also unprecedented competition among comes, and price. Each state, of course, will move insurance plans. at its own pace. But for unprepared AHCs, any State exchanges are granted significant powers pace of change could prove too fast. And in some to fundamentally reshape health care marketplac- states, exchanges will work to achieve goals by es—the way care is funded and delivered—so as to narrowing local provider networks and excluding reduce costs and achieve societal goals for health higher-cost AHCs. insurance and consumer empowerment. AHCs unable to compete with other providers For instance, to make it easier for consumers to on value (quality/price) or to be responsive to lo- understand and choose plans that are best suited to cal and regional health care needs could face sig- their circumstances, exchanges are empowered to nificant difficulties maintaining, let alone growing, limit the number of plans insurers can offer, require their roles in their local/regional marketplaces. that they offer particular standardized plans, and The initiation of the state health insurance that their various plans provide meaningfully dis- exchanges is but one (albeit important) aspect of 7 the ACA that will be redefining health insurance care utilization. In fact, in the foreseeable fu- coverage and health care in the coming years. ture, employer-based coverage could become AHCs must be prepared to engage with these the exception rather than the rule. The effects on many dimensions of the ACA and to come to the health care utilization and spending cannot yet be table with other stakeholders in their locales and predicted, but utilization and spending patterns regions with capacity to be a player in an account- could be significantly altered. able care environment in their markets. Figure 211 from the Association of American Medical Colleges (AAMC), shows provisions Changes in commercial insurance of the ACA (not including the aforementioned The chances are good that the ACA will catalyze likely changes in the employer insurance market) very significant changes throughout our nation’s causing a projected reduction of 14% per year in health care system. One of the biggest foreseeable teaching hospital revenues through 2021. changes will be in the commercial insurance mar- One item stands out in this graph: the impact ketplace. What it means to be insured will likely of the impending redirection of 50% of Dispro- change in the following ways: portionate Share (DSH) payments to hospitals. n Employers shift to “defined-contribution”—The The ACA is designed to roll out as a system, and ACA “exchange” model that creates statewide there are many “moving parts” that rely on other insurance market frameworks in every state parts for the overall mechanism to work. With so already is spurring many private companies to many states refusing to adopt the ACA’s proffered accelerate the creation and adoption of private Medicaid expansion, the scheduled DSH reduc- exchanges for their employees. This can become tions loom as a major financial threat to many a form of cost-shifting, as companies shift to DSH hospitals. providing defined-contribution benefits, which many predict will ultimately result in employees Impact of the Sequester paying more out of pocket for deductibles and As if a major recession and national health reform co-pays. didn’t provide enough challenges for AHCs, on n Employers adopt higher-deductible plans as the March 1, 2013, as required by the Budget Control standard—The “Bronze” and “Silver” insurance Act of 2011 (BCA), President Obama signed an plans in the statewide exchanges are priced to order initiating “sequestration.” The Sequester be more affordable for moderate-income peo- represents the largest reduction in public-sector ple; but, at 60% to 70% of actuarial value, they discretionary spending that most people in health are effectively high-deductible health plans. care will have seen or are likely to see in their Employers are likely to adopt these models in lifetimes. The Sequester, with its goal of deficit their employee health benefits, furthering the reduction above all, is a broad-brush and indis- trend toward shifting costs and some insurance criminate approach. The current and anticipated risk to employees. effects of the ACA on top of the Great Recession n Employers “push” most part-time employees would be difficult enough to deal with alone. The into the public exchanges—Since the ACA added impact of the Sequester is what warranted requires employers to provide insurance only “sounding the alarm.” Taken together, the reces- for employees who work 30 or more hours per sion, the ACA, and the Sequester will uniquely week, large employers are likely to adjust their challenge the resourcefulness, adaptability, and own policies to match the federal standard and even viability of AHCs. thereby effectively move millions of currently The BCA aims to control spending in two employer-insured part-time workers into the ways: First, it establishes caps that will keep new state- and federally sponsored exchanges. federal discretionary spending essentially flat in Just this one set of effects of the ACA on inflation-adjusted dollars over the next decade. commercial insurance could significantly change This amounts to about $1 trillion less in public- the profile of the insured population and health sector spending than had been projected prior 8 Figure 2. Estimated losses for all major teaching hospitals - Baseline reductions in Medicare revenue from ACA implementation11 Estimated losses as % of total estimated revenue $3,000 16% 14% $2,500 Estimated losses (millions) 12% $2,000 10% $1,500 8% 6% $1,000 4% $500 2% $0 0% 201320142015201620172018201920202021 Fiscal year Multi-Factor AMA VBP Readmission DSH (50% cut) % of total Productivity Source: AAMC, May not be reproduced without permission to the law’s passage. Second, it also established illustrates, now that the trigger has been pulled, the sequestration trigger mandating additional all federal research programs (and the people and automatic cuts of about 9.4% for defense spending programs they in turn fund) are facing significant and 8.2% for nondefense spending.12 As Table 112 and sustained reductions. Table 1 shows the im- Table 1. Estimated R&D cuts under balanced sequestration, FY 2013–201712 (budget authority in millions of constant 2012 dollars) 2013 2014 2015 2016 2017 Total Cut 5-Year Percent Dept of Defense -6,928 -6,818 -6,696 -6,585 6,495 -33,524 -9.1 HHS - 2,528 -2,429 -2,333 -2,241 -2,155 -11,685 -7.6 NIH -2,439 -2,343 -2,251 -2,162 -2,079 -11,274 -7.6 Dept of Energy -972 -944 -916 -889 -865 -4,585 -8.2 Natl Sci Foundation -456 -438 -421 -404 -388 -2,106 -7.6 NASA -763-733-704-676-650-3,527-7.6 Dept of Agr -189 -182 -175 -168 -161 -875 -7.6 Dept of Commerce -103 -98 -95 -91 -87 -474 -7.6 Dept of the Interior -65 -62 -60 -57 -55 -299 -7.6 EPA -46 -44-43-41 -39-213-7.6 Homeland Security -50 -48-46-44 -43-232-7.6 Total R&D Cut -12,099 -11,796 -11,488 -11,196 -10,939 -57,519 -8.4 Source: AAAS estimates of R&D, based on CBO and OMB analyses of the Budget Control Act (see reference 12). Constant dollar conversions based on OMB’s GDP deflators from the FY 2013 budget. Note: Figures for 2013-2015 do not reflect partial restoration of Sequester funds enacted in December 2013. Reproduced with permission from AAAS. 9 pact through 2017, but the Sequester will remain search support since 2003 has already had a severe in force through 2021. impact on the AHC research enterprise and on Some of the more daunting impacts include the work and careers of many types of scientists the following: in all stages of their careers. The elimination of Clinical spending: Sequestration will take 700 grant awards in FY 2013 alone is reverberat- $109.3 billion per year for the next eight years out ing broadly. And the Sequester cuts to clinical of our public-sector national health care spend- revenues add pressure to reduce or eliminate ing—resulting in an annual 2% reduction in Medi- cross-subsidization of research and other aca- care hospital and physician payments alone.13 demic missions. Research funding: Sequestration required the Everyone in AHCs can appreciate the impact National Institutes of Health (NIH) to cut 5% or of cuts of this magnitude. Some AHCs could be $1.55 billion of its fiscal year 2013 budget, which facing tens of millions of dollars in shortfalls of was already $530 million lower than its budget in funding necessary to cover the overhead and debt FY 2010. The result was that approximately 700 service costs on their science infrastructure. The fewer competitive research project grants were current environment for research is especially awarded in FY 2013.14 Going forward, the NIH troubling to the extent that it undermines much could be subject to funding reductions of any- promising work and threatens to derail a whole where from $2.3 billion to $5.6 billion per year generation’s worth of young people from pursuing over the next five years, depending on whether discovery and translational research. Failing to efforts to exempt certain military spending are protect opportunities for young scientists is tanta- successful.12 mount to destroying our own seed corn. National Science Foundation support: This is Estimated Sequester-related revenue reduc- subject to a $2.1 billion reduction in funding over tions suggest that the AHC research enterprise is five years. in need of some quick and serious action if it is to Military research and development (R&D) be saved from strangulating repercussions. At the spending: Under the best scenario, the Pentagon very least, AHCs must undertake thorough assess- faces a reduction of up to 20% of its procure- ments of their research enterprises to understand ment and R&D budget—more than $33 billion— how best to invest in and support the research through 2017. Spending reductions of a similar mission so critical to the future of health care. magnitude can be expected through the remain- ing years of the Sequester.15 Unanticipated structural changes in Altogether, cuts to federal R&D spending will health care spending amount to $57.5 billion through just 2017, while Having reviewed the fiscal impacts of the reces- cuts to clinical spending will subtract another sion, the ACA, and the Sequester, we must draw $109 billion per year. attention finally to a significant new structural ele- Under sequestration, the AAMC estimates ment affecting the health care marketplace identi- that AHCs stand to lose more than $3.5 billion in fied recently by leading health economists. Econo- public-sector payments and funding in FY 2014, mists have found that, in the period from 2003 to with increased and then sustained reductions of 2013, health care spending has slowed much more about $4 billion in each year through 2021. An significantly than predicted by CMS and others. alternative scenario, under which the Sequester Most forecasting to this point has attributed the is repealed, could lead to an even more ominous vast majority of the slowdown to the recession picture based on the possibility that health spend- and, most recently, to the Sequester. These are in ing would face even more draconian cuts not fact major contributors to the slowdown. But new spread equally across all discretionary spending. studies suggest that emerging payer, provider, and Direct research funding cuts of this magnitude consumer dynamics are driving more than 50% will present serious problems for medical schools. of the slowdown in public-sector health spending There is ample evidence that the slowdown in re- and at a rate significantly higher than forecast. 10 Figure 3. Projected health spending, United States, 2011-20218 Real per capita spending 2011 $US 12,000 CMS actuary forecast 3% 11,000 14% 10,000 At pre-recession growth (2003-2007) At recent growth (2009-2012) 9,000 8,000 201120122013 20142015 201620172018 201920202021 Reproduced with permission from Health Affairs. © 2013 by Project HOPE - The People-to-People Health Foundation, Inc. When you start with a projected $770 billion re- We conclude that a host of structural changes duction in public-sector spending and add to that – including less rapid development of imaging potentially similar adjustments within the private technology and new pharmaceuticals, increased sector, especially as state exchanges get their foot- patient cost sharing, and greater provider efficiency ing and exert their powers, it is easy to envision – were responsible for the majority of the slowdown well more than $1 trillion in health care spending in health care spending. The evidence thus suggests reductions over the next 10 years, and perhaps at least as strong a case for structural changes as for much more. These numbers are staggering in their cyclical factors. . . .8 size and proximity. It is no wonder that Moody’s projected a negative outlook for not-for-profit This particular analysis suggests that public- hospitals and the higher education sector.17,18 sector health spending could be as much as $770 billion less than what CMS has been predicting Ready or not. . . over the next 10 years (even considering the new Despite such worrisome data concerning these spending that could result from the millions of and related threats to the status quo and much new enrollees in the new health care exchanges). leadership trepidation about the prospective See figure 3.8 Ongoing spending reductions of this demands of transitioning to an accountable care magnitude have large implications for all stake- environment, many AHC leaders have read- holders in the marketplace for health care. While ily admitted that they and their systems are not forecasts such as these are the subject of much ready to undertake significant change.19 Most debate among analysts,16 leadership must factor AHC physicians, hospitals, and services remain into institutional planning the possibility of very focused on maximizing their revenues within the significant structural revenue reductions going parameters of the existing health care paradigms. forward. This is not surprising, given that demand for Altogether, the cumulative prospective impact advanced specialty care for high acuity patients of the recession, the ACA, the Sequester, and continues to be strong in many AHCs. With rep- the structural changes in health care spending utations for clinical excellence, AHCs continue represent an unprecedented fiscal cliff for AHCs. to be preferred providers for a range of primary 11 and secondary health care services as well. Leading change in AHCs: Therefore, even as senior AHC leaders see fire raging all around them, many have not been A world of complexity able to translate this into the sense of a “burning The difficulties for AHCs in transitioning to platform” such that leadership at departmental integrated, accountable care have been widely levels and at the front lines of clinical care are studied. They include the effects of traditional moved to plan and undertake large-scale system university and academic medical cultures, and operational changes. The inclination is to stay entrenched bureaucracies and practices, legacy the course and wait for a while to see how this administrative and information technology (IT) unsettled environment plays out. Why rush into a systems, and much more.20 major transformation effort, which will undoubt- The academic medical environment indeed edly be disruptive, without any assurance that poses particular challenges. But the fact is that we will be able to change in ways that can make change is hard in almost any environment or or- us more successful than we already are? In fact, ganization. Above all, change requires leadership. why not build that new hospital inpatient tower? The failure to undertake needed change almost Why not open new urgent care centers, hire more always reflects failures of leadership. The Blue specialists, and maybe cannibalize more groups of Ridge Group has addressed the issue of leader- highly productive surgeons from nearby competi- ship in a number of past reports. The issue keeps tors? resurfacing because it continues to be extremely Our response to these good questions is this: relevant and urgent. This time it really is different. Our nation has We have examined in a previous report the adopted accountable care as national policy. Fun- leadership implications of AHCs as complex damentals of insurance and health care delivery adaptive systems.21 This organizational dynamic are changing. Far from a transient movement, this structures all leadership and management issues is a transitional moment. in AHCs. To recap, complex adaptive systems The entire community of insurance and health have the following characteristics: care stakeholders is incentivized to transition to accountable care and to embrace its dynamic to • hey are nonlinear and dynamic and do not inher- T find the best paths forward. The ACA is catalyz- ently reach fixed-equilibrium points. As a result, ing and harnessing an array of creative, competi- system behaviors may appear to be random or tive, and innovative forces in order to rational- chaotic. ize health services and achieve better health • hey are composed of independent agents whose T outcomes. Because of their seminal missions behavior is based on physical, psychological, or and capabilities, AHCs must engage fully in this social rules rather than the demands of system comprehensive recasting of our nation’s health dynamics. care system. Failure to engage and to provide • ecause agents’ needs or desires, reflected in B leadership could leave AHCs isolated and unable their rules, are not homogeneous, their goals and to fulfill their missions. behaviors are likely to conflict. In response to these As one presenter at a 2013 AAMC Leadership conflicts or competitions, agents tend to adapt to Summit remarked, “Change is coming with or each other’s behaviors. without academic medicine.”11 It is the view of the • gents are intelligent. As they experiment and A Blue Ridge Group that change must come with gain experience, agents learn and change their be- AHCs. Failure cannot be an option. haviors accordingly. Thus, overall system behavior inherently changes over time. • daptation and learning tend to result in self- A organization. Behavior patterns emerge rather than being designed into the system. The nature of emergent behaviors may range from valuable 12 innovations to unfortunate accidents. despite calls that arise periodically to fundamen- •T here is no single point of control. System behav- tally transforming American higher education to iors are often unpredictable and uncontrollable, become more focused on creating one or another and no one is “in charge.” Consequently, the type of educational outcome, most commentators behaviors of complex adaptive systems usually can are reluctant to support changes to the fundamen- be more easily influenced than controlled.22 tals of the CAS of the academic environment that could possibly compromise its future success.23 From the point of view of complexity science, Yet, as a result, engineering change in the uni- our health care system overall has operated as a versity setting comes with its own special brand of complex adaptive system (CAS). Such systems can difficulties. As Rouse describes it, be distinguished from traditional organizations, which are amenable to relatively direct command We tend to think of universities as being hotbeds and control. Power is the main currency in a of innovation—bellwethers of new trends in art, traditional system, whereas influence is the main science, technology, and lifestyle. This is true for the currency in a CAS. products of universities. However it is far from true for their processes. . . . Universities’ delusion that One cannot command or force such systems to com- they have the necessary processes makes it almost ply with behavioral and performance dictates using impossible for them to tackle big problems. . . .24 any conventional means. Agents in complex adaptive systems are sufficiently intelligent to game the So long as organizations, systems, and indi- system, find “workarounds,” and creatively identify viduals are firmly embedded within the academic ways to serve their own interests.22 culture of the AHC, they and their individual ac- tors will be highly competent and inclined to the AHCs have intrinsic CAS characteristics that independent and self-organizing behaviors that must be well understood in order to be properly are typical within the complex adaptive academic managed, leveraged, and changed. AHCs consist medical environment. This has important implica- of many separate units and individuals who are tions for AHC leaders who contemplate leading differently situated depending on a host of profes- change in the era of accountable care. sional, personal, functional, institutional, and other factors. To the extent that AHCs have been Are AHCs “trapped by their able to achieve higher integration of units, sys- competencies?”25 tems, and practice, this generally has been done Over the past two decades, AHCs have had to not by forcing new behaviors or processes, but by adapt to increasingly competitive markets for incentivizing behaviors, whether in the form of health care services while also covering their criteria for promotion and tenure, professional added costs as the main centers of bioscience and inducements and rewards, new shared-risk or clinical research and of health professions educa- incentive compensation models, or, as in research, tion. AHC leadership eventually did well in adapt- through policy-driven initiatives like program ing to this competitive environment by adopting project grants and the Clinical and Translational two common marketplace strategies, especially Science Awards (CTSA) program sponsored by with respect to highly specialized and unique the NIH. tertiary and quaternary health services: growing Scholars have long pointed to the great capac- capacity and commanding premium pricing. Evi- ity of universities and their AHCs to adapt to dence indicates that much of the steady increase changed societal and other environmental factors in health care spending in recent years derives over centuries and attribute this in no small part from steadily increasing volumes and costs per to the adaptive capabilities inherent in these or- case across the health care system. AHCs have ganizations. It is hard to argue with success. And been complicit in this. 13 Figure 4. Five decades of medical school growth 1960-201111 1,600% 1500% 1,400% 1,200% 1,000% 800% 600% 425% 400% 370% 278% 200% 148% 72% 56% 0% U.S. population GDP in # of # of fully # of graduates # of full-time # of full-time constant physicians accredited basic science clinical faculty dollars medical schools faculty Source: AAMC. May not be reproduced without permission Figures 411 and 511 show that AHCs man- been that AHCs have not generally been driven aged to grow clinical capacity quite successfully. by or known for clinical efficiency or patient- Figure 4 shows that, since 1960, medical schools centered care. have grown their clinical faculties by an average On top of the wide array of policies and incen- of 1,500%. Figure 5 shows the results in revenue tives that have driven volume and intensity of ser- growth. In 1960, medical school clinical revenues vices, there are the overall projected demographic were negligible. By 2013, they were averaging trends, including the following: $426 million per medical school, and clinical rev- n y 2020, 157 million patients will suffer from B enues grew at a far higher pace than other sources chronic disease (81 million with multiple of revenues. Medical schools and their teaching chronic conditions). hospitals together accounted for more than $255 n ancer, mental disorders, and diabetes disease C billion in clinical income in 2012.26 prevalence will increase by 50% by 2023.27 By no means have AHCs been unique in n e number of people with disabilities is pro- Th pursuing aggressive growth strategies. Providers jected to grow from about 5.1 million in 1986 across the country have long been consolidating to 22.6 million in 2040, or nearly 350%, even as and adding capacity to compete in their markets. the elderly population overall will grow by only However, many community-based provider sys- 175%.28 tems could not command premium pricing based The ACA calls for providers to work within on brand and university affiliations. They more budgets and to assume financial risk for patient vigorously pursued other competitive strategies, populations. This might further incentivize some including clinical and administrative efficiencies AHCs to scale up their clinical business. But the and better customer service. A legacy of AHCs’ added requirements of working within global historic clinical growth and market power has budgets and accepting financial risk in patient 14 Figure 5. Medical schools have witnessed exponential growth fueled by medical service income11 $100 $90 $80 $70 Revenues in billions $60 Medical service $50 $40 $30 Federal research and other federal $20 Other income $10 Tution and fees State, local and parent appropriations $0 1965 1975198519952005 200620072008200920102011 Fiscal year 1965 - 2011 Source: LCME 1-AAnnual Financial Questionnaire (AFQ), 2011 © 2013 AAMC May not be reproduced without permission management also require the capacity to reorga- n S treamline clinical services, institute quality nize and align clinical and administrative systems initiatives, and improve the patient experience to manage population health, assume risk, and n Rationalize budgeting across traditional depart- control spending. So, while demand for health mental and unit “silos.” This includes instituting care services will continue to grow, the primary financial and budgeting transparency as well as clinical volume and pricing strategies relied on clarity on cross-subsidization by AHCs are among the causes of rising health n lign management structures across academic A system costs being targeted by the ACA. and/or clinical units—especially to align faculty Not just for AHCs, but also for the health practice plans with hospital and medical school system as a whole, the ACA recognizes that management much of the organization and cost of health care n ntegrate and optimize support functions where I is driven by the behavior of physicians and their benefits of scale can be realized. This includes organizations, acting as agents within the scope consolidation in areas such as legal, human of a CAS. It is apparent that the architects of the resources, and audit services; information tech- ACA understood well that the actors and orga- nology; debt; and investments. nizations they were trying to influence through n enew via philanthropy capital and subsidiza- R public policy had to be incentivized rather than tion funds for new facilities, hospital/clinic forced into the desired behaviors and administra- reinvestment and redevelopment, research, tive structures. endowment, and program and financial aid There are many approaches that AHCs and All of these are vital to preparing for success universities have begun to use to grapple with the in the era of accountable care. But reports from realities of this evolving accountable care environ- the field are not terribly encouraging. They tend ment. These include efforts to do the following: to portray an array of promising initiatives that 15 remain localized, are designed as “one-off ’s,” are AHCs to pursue a range of strategic options and only partially achieved, and that fail to grow or to partnerships going forward that otherwise might be generalized to the broader institution.29 Very not have been possible. These include the capacity few AHCs are able to report broad-based and to undertake population health and risk manage- high levels of success in transforming themselves ment strategies built around this workforce. Of to succeed as accountable care providers. course, there is a great deal more involved in de- veloping the capacity to manage population health Complexity in defining the future of the and financial risk, but AHCs in many situations AHC clinical enterprise certainly can start from the capacity to marshal AHC leadership faces both opportunities and the necessary workforce and/or to add partners to challenges deriving from the explosive growth grow and fill out that capacity. of the clinical enterprise. There are many differ- There is a major leadership opportunity here ent approaches that AHCs have taken to expand and perhaps even a path to the resolution of linger- their clinical capacities, including adding clinical ing academic versus practice-focused faculty and faculty to the medical school and/or the hospital, clinicians: to engage the capabilities and motiva- adding community physicians in some affiliated tions of this primarily clinical workforce and capacity, or variations of all of these and more. recruit these clinicians to the opportunities of pio- Whatever the strategy, many AHCs now feature neering new team-based, accountable care in the a large cohort of primarily clinical faculty that emerging accountable care environment. There are dwarfs the teaching and basic science faculties. a number of examples of health systems led by cli- This vast expansion of clinical workforce at nicians successfully embracing demands of the new AHCs has changed these organizations, and in accountable care environment. Many of these were many cases has caused medical schools to wrestle already characterized by leadership, organization, with complicated questions about academic and and cultures focused on team-based and patient- professional roles and expectations, including centered care, usually along with an insurance issues of promotion and tenure. Questions have product. The Cleveland Clinic, the Mayo Clinic, been raised about whether medical schools are Geisinger Health System, and Kaiser Permanente creating two or more classes of faculty and about come immediately to mind. Of course, AHCs start whether this new clinical workforce consists of in- from leadership, organizations, and culture that dividuals, organizations, and systems that are far are mostly products of the traditionally balkan- more like clinical organizations found in regional ized academic environment. But many AHCs with and community hospitals and systems and some large clinical workforces should be able to develop large physician practice settings, than in the tradi- a similar organizational and cultural capacity for tion academic setting. team-based and accountable care. There are many different answers to these There are encouraging examples of AHCs questions, which we will not review here. For and AHC-affiliated organizations pursuing quite our purposes, the important point is that AHCs aggressive and comprehensive strategies to transi- have shown that they could adapt to the need for tion in such ways to the era of accountable care, growing clinical capacity and that this new clinical several of which we will review here. But while workforce could in various ways be “shoehorned many AHCs are showing themselves to be adap- in” to align with, or to work in parallel with, tive and nimble enough to develop significant traditional academic and professional colleagues, capacity in population health management and especially where the additional clinical workforce accountable care, one cannot ignore the consider- has been successful in generating departmental able difficulties that many AHCs have had in initi- and health system referrals and revenues. ating and leading change into the era of account- One upside of this development is that the able care. As we will discuss further, AHCs must accumulation of large clinical faculties and their consider a range of strategic directions forward breadth of clinical experience can enable some that are of a scale and nature compatible with a 16 thorough and honest assessment of the particulars of the science-funding environment. of each AHC’s situation and environment. But as the pressures of the marketplace have increased, medical schools and teaching hospitals Complexity in defining the future of the have seen margins tighten, and clinical faculties AHC science enterprise have been under pressure to be more produc- As AHC leadership contemplates future states, it tive. At the same time, expectations have grown is also vital to realize that the dynamics of their for progress in clinical technologies and better complex adaptive systems also apply to the other outcomes, while pressure has mounted to more missions and functions of the AHC, in particu- quickly move science from the lab to the bedside. lar, in education and research. Here, our focus The science enterprise in some AHCs has is primarily the future of bioscience and transla- expanded its funding base through the addition tional research. (See our most recent report for of large project grants and industry-sponsored an accounting of educational imperatives and research but never enough to cover the overhead opportunities.)30 costs that continued to mount as AHCs added As with the clinical faculty, basic science facul- faculty, built modern facilities, and added core ties operate within the AHC complex adaptive technologies. As a result, the research enterprise environment in their own ways. Basic science has heard increasing calls to wean itself off of clin- faculties are traditionally organized into particular ical cross-subsidies, to “right-size” itself, to align medical school (and other university and health itself with the needs of accelerated device and professional school) departments and also func- drug development, and to identify new sources of tion within the academic milieu in which they support.31 An equivalent call has gone out to the trained and consider their disciplinary home. educational enterprise.29 This is another major Basic science has traditionally been organized leadership challenge of the emerging accountable around individual laboratories run by senior sci- care era. entists who individually develop research agendas, There is consensus that the AHC science compete for grant funding, and publish their enterprise is absolutely critical to our missions results. Scientists often collaborate across labs, de- and to forward progress in medicine and health partments, institutions, and continents. All of this and that working to ensure its future success must occurs within the context of a well-defined ap- be one of leadership’s highest priorities. Certainly, prentice system where younger scientists generally public-sector sponsored funding has been in de- join a lab and are mentored there until such time cline for more than a decade and is vulnerable to as they can win their own funding and establish shocks (like those we are currently experiencing) their own lab. Obtaining and maintaining funded from socio-economic and political forces. There support over time is critical to success. is also ample evidence that the basic research Given the competitive and peer-reviewed enterprise in places has lost focus, grown too fast, nature of most grant funding and the large invest- and often fails to identify and promote some of ments required to build and maintain research the most innovative and creative thinking. The space, the basic science enterprise has long been AHC science enterprise also has suffered from cross-subsidized with clinical revenues. This over-promising and under-delivering on the near- worked well in the early post-Flexnerian days, term possibilities for major advances in medicine when most clinical faculty were clinician scien- and health care based on emerging knowledge in tists and conducted their research in the context genomics and other fields. Given the overall focus of their clinical practice without resort to much on driving integration, alignment, and innovation, if any external support. As the more purely basic there is a groundswell of sentiment that AHCs science and clinical faculties grew separately and must not simply re-engineer basic science funding clinical revenues soared, clinical cross-subsidiza- but also expand translational research as a way to tion became implicitly accepted as necessary and put greater focus on the bench-to-bedside drug vital to the science mission within the constraints and device development pipeline. 17 The research enterprise in AHCs must undergo strengthen the science enterprise by reasserting thorough review. But, as with other aspects of the the clinical mission’s role in supporting basic sci- AHC environment, thorough examination of the ence and by focusing on the training of investiga- science enterprise can occur only in the context of tors and clinician scientists. In some cases, this how that enterprise is currently embedded within might require innovative partnering with clinical the complex adaptive dynamic of medical schools systems of larger size and scope. and their tripartite mission. There is virtual consen- With many possibilities for configuring the sus that all AHC units and functions have to be science enterprise within AHCs, the levels of lead- actively engaged in reducing costs and collaborat- ership engagement and the specifics of institution- ing in re-engineering operations and behaviors al strategic visioning and planning will determine to achieve not just localized but institution-wide those futures. goals. But leadership must face some very difficult Regardless of the particular strategy or con- questions about how and to what extent the scien- figuration, AHCs must prepare themselves to be tific enterprise, including its funding and its focus able to work effectively with new partners. AHCs should, or indeed can, be restructured. have a mixed track record in this. An example is At the very least, leaders and other change the experience, starting mostly in the 1980s and agents must start from a clear vision of a success- 1990s, of AHCs deciding to aggressively pursue ful future science enterprise in their institutions academic-industry partnerships. This was a lead- and within the context of their communities. ing strategy in the goal of leveraging the extraor- From there they can consider the types of changes dinary intellectual and discovery resources within that can best achieve success. In the context of the AHCs in order to accelerate drug and device de- emerging accountable care environment, most velopment and to monetize these otherwise latent strategic planning focuses on aligning all units assets. But AHCs confronted many difficulties, and functions around shared institutional goals. not the least of which was meeting performance For many AHCs, this will likely mean aligning the expectations in the new environment. To do so science enterprise to become more translation- meant not simply to network into new markets focused and self-sustaining by forming new and partnerships but to adopt new ways of work- philanthropic and industry partnerships, among ing, along with new metrics. This was difficult other measures. for many AHCs that did not adequately prepare But it is likely that AHCs will assess the ca- themselves for their new roles. Rouse summarizes pabilities, contributions, focus, and financing of the problems well: their science enterprises in a variety of other ways as well. Alignment will likely have different mean- Universities thought that selling university-industry ings in different circumstances. Some AHCs will partnerships would be the hard part of change. They continue to be the major tertiary and quaternary did not expect that making these partnerships work care center in their locale or region, and on top is actually the hard part. Making them work requires of that develop capacity for managing population rethinking the universities’ processes ranging from health (i.e., be all things to all people). But for the finance and accounting to incentives and rewards. In majority where this may not be feasible or desir- other words, they did not expect to have to adapt to able, there are still many possible configurations their new markets.24(p143) and alignments of the clinical, science, and educa- tion functions and missions. This might include The fact that it has taken a decade and more of the following: time and effort for many AHCs to adapt their pro- n aring down or refocusing the science enter- P cesses and capabilities to new partnerships in mar- prise or kets that function in more traditional (rather than n artnering and sharing resources with philan- P complex adaptive) ways belies a lack of sufficient thropic organizations, industry, or other AHCs appreciation for the requirements of operating and Alternatively, an AHC might decide to succeeding in this environment. The critical lack of 18 leadership experience and therefore of strategic fo- educational, and research programs. cus on creating the requisite operational capacities AHCs need to address not just administrative, is an important lesson that must inform planning but programmatic operations and priorities. AHCs for innovative partnerships going forward. must integrate health care delivery both within An important underlying issue for AHCs, with their own systems and now, too, with those of new implications for the entire health care system, is partners. They must update educational programs how to equitably account for and cover the costs to train physicians and other health care workers of the education, training, and research that AHCs for the new era of accountable care, reorganize conduct. This issue has not yet been sufficiently or rethink the research enterprise, develop the addressed in the planning for the era of account- capacity to assume risk in the management of able care. AHCs, which must cover the added population health and episodes of care, perhaps costs of these vital activities through clinical rev- acquire or create an insurance product, enter into enues, cannot be expected to compete directly or strategic partnerships where necessary or advanta- successfully with other clinical organizations that geous, align all of these missions and functions, do not carry such costs. These additional costs and ensure that changes in the financial obligations can also make strategic partnering more challeng- and risks (and sometimes missions) associated with ing. These vital university and AHC education AHC success continue to be compatible with the and research programs undergird our nation’s larger university missions of which they are a part. health care workforce development and much of And all of this must be done not in a command the progress in medicine and health care. Even structure but within the context of our complex with extraordinary efforts by AHCs to reduce adaptive systems, cultures, and organizations. costs in the education and science enterprises, the We believe that the vast majority of AHCs can economic viability of the AHC community will find productive and successful paths into the era require policymakers to address the critical issue of accountable care. There are many approaches of how to equitably allocate and pay for the costs that AHCs can take in meeting any and all of of these AHC functions. these challenges and a large number of gifted consultants who can help guide the choice and Multiple options, one imperative implementation of options. However, the one The economic and policy forces at play nationally over-riding imperative for all AHCs is for leader- are catalyzing a great deal of hospital and health ship to take the initiative and to make the case for system consolidation. There is growing evidence change, despite the absence in many cases of an in many markets that even AHCs with relatively obviously burning platform. And then leadership secure or even dominant market positions are must engage their institutions in taking on the being challenged by large, well-capitalized health bottom-up and top-down work that must be done systems that are also increasingly capable of com- to effect such transformational change. peting for patients requiring advanced care.32 As we have previously observed, there are many approaches most AHCs have begun to use Leadership needed to effect to grapple with the realities of our evolving eco- nomic and policy environment. But in this new enterprise transformation environment, even more is required. Many AHCs “To achieve success there must be a continual process will have less market power to command higher for anticipating impending situation changes, recogniz- prices, and they may have less capacity to grow ing their emergence, and responding to them.”—William services. Absent the development of new market Rouse25(p199) approaches, some AHCs could fail to provide sufficient cash from operations to simultaneously The difficulties involved in accomplishing the meet current operating needs, invest in and renew leadership imperative to effect enterprise trans- physical plants, and grow and enhance clinical, formation cannot be overestimated. Large-scale 19 and system-wide transformation is extremely environment) and then also a vision of the best challenging. Evidence shows that attempts at possible roles that their AHC can play within enterprise transformation very often fail. This their markets and communities. Then the leader- can be seen by looking at the track record of even ship must inspire and empower change agents America’s most prosperous and successful com- throughout relevant units in their organizations to panies. From 1956 to 1981, an average of 24 firms put meat on the bones of this vision in the form of per year dropped out of the Fortune 500 list. This strategies to achieve the future envisioned. amounted to 120% turnover in 25 years.33 And Importantly, since people and units within apparently, our information age economy is even these complex adaptive AHC organizations are more competitive. From 1982 to 2006, an average differently situated and succeed by self-organizing, of 40 firms dropped out of the Fortune 500 list one of the biggest challenges for leadership is to every year, an accelerated 200% turnover in 25 develop vision and strategies that work for each years. Clearly, even our best companies can’t keep of the different constituencies. Leadership must up with the demands for change and innovation. make clear to each of them how change will affect They falter and/or fail at a very high rate. There is them, how they can succeed in the envisioned no prima facie reason to believe that AHCs will be environment, and how the institution—its culture exempt from this dynamic. and rewards systems—will support them and en- This rate of failure appears to be in the nature able them to succeed. of a highly competitive and successful capitalist Selling the vision and then committing to economy, where existing companies lose their working through the success factors for all con- competitive edge to entrepreneurs who can create stituents is critical. In complex adaptive AHCs, new and better products and business processes. individuals and even whole units are invested in Classical economics posits that this competitive countless ways in working with, and sometimes dynamic is to be expected and encouraged as the around, current systems. Even the “workarounds” best path to continuing progress and prosperity. are important parts of the system and culture. But, of course, this is no consolation to the enter- Incentives, rewards, policies, and priorities are all prises that can’t adapt and change. mutually reinforcing and “influential” in main- This high turnover rate shows that stakes are taining “free-agent” investment in the current high and success rates only moderate in maintain- systems. And most people are not equipped with ing a competitive edge and leadership. Such For- enough information, perspective, and authority tune 500 turnover, as well as the fate of other large beyond the purview of their immediate responsi- and small enterprises throughout the economy, bilities to understand, anticipate, or begin to ad- most often represents the failure to innovate dress the impact of larger institutional or societal and to anticipate and initiate needed change. As forces. organizations remain embedded in the status One of the great responsibilities of leadership quo, it becomes harder and harder to transform is to provide timely information about, and notice essential business systems and strategies in order of, the need to plan for new pathways for success. to maintain competitive advantage. Past a certain Until leadership provides this notice and initiates point, there is simply too much to do to catch up processes that legitimize planning for change, to the innovators and new market leaders. And as most people and units can and will only work the data show, timely enterprise transformation within existing rules and expectations. Therefore, appears to have become more difficult with the leadership must not just provide a vision, but acceleration of the development of new platforms must specify the policies, priorities, incentives, and technologies.34 rewards, and sanctions by which people and units To beat these odds, leadership in AHCs must can or must reorganize their work and behav- be able to develop and “sell” a comprehensive iors. If leadership persists in keeping people and vision of possible futures for their state and local organizations in the dark and in avoiding issues health marketplace (or whatever is the relevant surrounding the need for change, then leaders will 20 not prepare their people or their organizations for a Leadership Forum Summit in February 2013, future success. where AHC leadership met to discuss how AHCs Most often, in our complex adaptive systems, could and should approach the era of account- a burning platform has provided the impetus to able care. And it devoted much of its 2013 annual enable leadership to create the legitimacy and meeting to this and related topics.36 An overarch- the motivation for significant change. In a period ing theme and motivation in these efforts is to such as we are in now, where the burning platform identify leadership qualities and to spur leader- is masked in many AHCs by the local experience ship action that can preserve and enhance the spe- of full clinics and reasonable clinical margins, this cial missions of AHCs in clinical care, research, task is more challenging. The test for leadership in education, and community engagement. The new this instance is to develop a vision and motivation leadership qualities are identified in table 2.37 for change that is compelling within the context of Preservation and enhancement of these missions that AHC’s environment and situation. is paramount, since these distinguish AHCs from Leading health professional organizations, in- other providers and are indispensable roles in the cluding the AAMC and Association of Academic nation’s health care infrastructure. Health Centers (AAHC) have been working to But it has become clear that not all AHCs build better awareness of the impending trans- will be able to go forward with real strength and formational changes in health care and insur- impact in all of their traditional mission areas. ance and to help AHC leadership enhance their Some AHCs are positioned in their environments change management capabilities. The AAHC has to feature the full-range of clinical capacities and held conferences and published white papers on prosper as major clinical systems in the new ac- various aspects of preparing for health system countable care environment. Yet even these will transformation.35 The AAMC has been developing be differently situated, depending on the particu- and sharing expertise in leading change. It held lars of their local or regional markets. Some will Table 2. Transforming academic medicine requires different leadership competencies37 Traditional Future-oriented © 2013 AAMC May not be reproduced without permission 21 own all of their assets, including personnel and market and policy dynamics and opportunities, facilities. Some will own only assets that constitute then the second question is how to establish a vi- particular strengths and partner for the rest. Some sion that is in line with these realities and with the may partner for virtually all facilities or for a large realities of the AHC itself. The third question is number of clinical and referral physicians. entirely separate in the sense that it involves devel- Other AHCs may be better positioned to focus oping the capacity to win over all of the relevant on their educational and research missions, while AHC constituents to the efforts needed to effect reducing their owned clinical services and part- the needed transformations. nering with community hospitals and ambulatory Perhaps the single most difficult hurdle for practices to fulfill their clinic-dependent missions. leaders in addressing the second question and Then again, some AHCs will be better positioned developing a vision for change is to develop to focus completely on preclinical and clinical and work from an accurate assessment of their education and training, most likely with commu- organizations and their capacities to drive stra- nity-based partners. It is interesting to note that tegic change management. Systems engineer and the most recently created medical schools are not consultant William Rouse reports that one of directly connected to university hospitals and are his most important roles with clients is “myth- favoring this latter model. busting.” This involves helping clients correct The overall societal goal is universal, value- outsized or inaccurate estimations of their own driven, accountable care. In this context, it is nec- capabilities and track records, as well as their ca- essary for each AHC to consider the possibilities pacities to change and innovate. It is very hard to of alternative priorities for their missions as well know where you are going if you don’t start from as many new types of relationships and partner- a realistic assessment of where you are. Striving ships within the multiple capacities required to to attain an accurate and honest assessment of achieve accountable care. organizational capabilities and, where necessary, myth-busting, is critical to the capacity to effect Focus on value successful change. Knowing where your value lies is the only way to understand and poten- The challenge of value is the foundation challenge of tially revise or reinvent the organization’s value strategic management. Understanding the ways in proposition(s) to align with emergent opportuni- which your enterprise provides value to its stakehold- ties. ers and then continually enhancing—and occasion- The challenge of understanding an organiza- ally reinventing—how value is provided should be a tion’s value proposition rests in large part in the driving strategic priority.38 fact that value means different things to different stakeholders. In a typical private enterprise, for Leadership looking ahead to develop a compelling example, value for customers involves the benefits vision of the future of an AHC must start by ask- of products or services relative to their cost. For ing and answering three basic questions: employees of the company, value relates to things 1. What are the emergent market dynamics like the work environment and compensation. and opportunities? For stockholders, value rests in stock prices and 2. What is our vision? And what is/are our value market valuations.38(p60) proposition(s) (the organizational output(s) that Value in health care can be defined as add value to customers and stakeholders and align with community and national health priorities)? . . . the health outcomes achieved that matter to 3. How can we transform and align our orga- patients relative to the cost of achieving those out- nization (including people, processes, culture) and comes. Improving value requires either improving one our value proposition(s) with emergent market or more outcomes without raising costs or lowering dynamics and opportunities? costs without compromising outcomes, or both.39 Once leadership understands the emergent 22 Using this definition, it is not hard to see that leaders that can increase the chances of success in the definition of value within the AHC as tradi- initiating and driving needed enterprise transfor- tionally understood is different from the value mation. proposition being driven by the ACA and by other forces current in health care and insurance Get out of the weeds marketplaces. This difference is captured in the One of the basic issues in effecting and managing Harvard Business Review by Porter and Lee: change necessary to achieve success in the ac- countable care environment has to do with limita- We must shift the focus from the volume and tions of leader and manager experience in strate- profitability of services provided—physician visits, gic as opposed to operational thinking, planning, hospitalizations, procedures, and tests—to the and execution. In most enterprises, including patient outcomes achieved. And we must replace AHCs, the imperatives of increasing competition today’s fragmented system, in which every local in health care over the past two decades or more provider offers a full range of services, with a system has tended to select for leaders and managers who in which services for particular medical conditions are skilled at reducing costs, creating efficiencies, are concentrated in health-delivery organizations and and responding to an array of interrelated opera- in the right locations to deliver high-value care.39 tional issues.38(pp9-10) These leaders and managers spend most of their time responding to immediate The challenge for leadership of AHCs is to or short-term process, human resources, and bud- clarify that the new value proposition will struc- geting issues. At the same time, leaders and man- ture everything that matters in the organization agers also have had to learn to manage people and going forward. systems across disciplines outside their traditional Once leadership has made the case for change, expertise. This has contributed further to keeping then the truly herculean task is addressing the management focused on mastering the details of third quest: growing and re-enforcing the new val- effective operational solutions, rather than overall ue proposition throughout the organization and strategic planning. culture such that it catalyzes the organization to Understanding the overall situation of an adopt the new definitions of value and to become AHC and envisioning a successful future state in proactive, in all of its complex adaptive ways, in a new era of accountable care requires leadership inventing new ways to create that value. that has the time for strategic thinking and is ca- pable of engaging a wide array of stakeholders in How leadership can succeed in catalyzing strategic planning. Even in situations where there value-based enterprise transformation are any number of managers and team leaders with good strategic capabilities and ideas, these Enterprise transformation is driven by experienced are often preempted by immediate operational and/or anticipated value deficiencies that result in issues and goals. AHC leadership must be capable significantly redesigned and/or new work processes of abstracting out of the weeds to the broader as determined by management’s decision mak- fields of vision necessary to lead transformational ing abilities, limitations, and inclinations, all in the change. context of the social networks of management in particular, and the enterprise in general.34 Adopt a strategic cast of mind In order to be able to approach the strategic The failure to effect needed change in our AHCs dimensions and requirements of the transition is most often rooted in very basic leadership is- to accountable care, leadership must essentially sues or miscalculations rather than in outsized adopt a new “strategic” cast of mind. Leadership complexity or overwhelming demands intrinsic must be capable of saying, “We may not simply to success in a new environment. The follow- have to reorganize what we are doing, we may ing guidelines represent key insights from AHC have to rethink it.” 23 Communicate, communicate, communicate Identify and eliminate mythologies that crowd Once leaders and senior managers have honestly out realistic assessments come to grips with the possibility that serious Another major issue that leads quickly to failure rethinking is required, then it becomes leader- is the inability of leadership to accurately assess ship’s responsibility to communicate to the entire their own and their organization’s strengths and organization the nature of the challenge ahead weaknesses. As noted previously, myth-busting is and then to articulate the imperative to undertake critical. It is very hard to know where you might the rethinking process. Leaders can often fail to go if you don’t start from a realistic assessment of articulate and communicate the “story” of the where you are. organizational vision being pursued, why change Leading causes of failure to effect needed is necessary, how the organization will achieve transformation include the following: this future, what everyone’s roles will be, and what n reasonable plan is never created: Leadership A help will be provided to succeed in this role. Not adopts a wait-and-see attitude. to “sound the alarm” means not to prepare our n reasonable plan is developed that is not A people and our organizations for future success. It viable: Leaders choose to “get back to basics” is the role and responsibility of leadership to com- rather than to move ahead with innovative municate the need for new thinking and then to solutions. Complex adaptive behavior on the help chart the paths to success as well as motivate part of multiple constituencies in the AHC can and move people along those paths. Otherwise, cause leaders and managers to default to paths even knowing that change is necessary, people of least (or less) resistance and so the organiza- will continue to work according to existing rules tion undertakes too much localized process and within existing frameworks unless—and un- re-engineering and not enough enterprise til—leadership effectively gives them the permis- transformation. sion, the imperative, and the process by which to n reasonable and viable plan is achieved but is A begin the change-making process. not executed: Incentives and rewards are not changed adequately to align with the plan. “ … to drive the efforts of the organization long term, the n ritical relationships and trust are missing: C message must be more than inspirational. The value of the Leaders have failed to engender the fundamen- message must be real and be something the organization can tal trust that is essential to engaging people in rally around.”4(p387) their best efforts as honest agents of change and working toward success. Ingredients neces- Employ appropriate leadership models sary to building trust include mutual respect, Another pitfall for leaders is to misconceive the transparency, and integrity in all interpersonal role of leadership as a form of “Moses coming and organizational matters.4(pp388-392) down from the mountain” with an enlightened and fully formed set of prescriptions that are writ “Changing an organization is about changing hearts and in stone. Instead, leaders in our complex adap- minds. It is about changing the way individuals feel, think, tive systems require change agents “whose roles and act. It is not a logical, analytical endeavor.”40 are to facilitate communication, cooperation, and collaboration.”25(p209) Planning for change of the Conclusion magnitude called for in the transition to account- able care requires more facilitative leadership “An organization is nothing more than the collective ca- and a broad-based and multi-layered planning pacity of its people to create.”—Lou Gerstner, former and implementation process that can evolve on IBM CEO the basis of the wide array of inputs needed from within all mission areas and units of the AHC. The environment for AHCs is challenging, and the stakes are high. Leadership in AHCs must develop a compelling vision of possible futures 24 for their AHCs in their local and regional health Restructuring decision-making: Univer- marketplaces. Proactive and forward-looking sity of Michigan Medical School leadership can bring meaningful engagement and “Stop trying to think your way to a new way of working. necessary, innovative change. There are as many Work your way to a new way of thinking!”—University possible futures and scenarios as there are leaders of Michigan Medical School planning moniker of AHCs. To preserve and strengthen the critical roles and missions of AHCs in our health care The University of Michigan Medical School future, AHC leaders must step forward and lead (UMMS) has been at the cutting edge of re- their people, their institutions, and their com- form of health care systems. As leaders at the munities in the transformative work of creating medical school began to prepare for the era the future of accountable, affordable, value-driven of accountable care, they understood that the health care. concept of accountable care should be rooted in the following: n ddressing the fragmented nature of health A Pathways to AHC transformation: care delivery n inancial incentives for broad cost containment F Examples from the field and quality performance across multiple sites of care “To flourish—indeed to survive—AHCs must reconfigure n provider-led organization with meaningful A and transform rapidly and broadly in size, speed, value, beneficiary input and innovation.”41 n ccountability for quality and cost of a popula- A tion To get a better understanding of what the process n ncouraging physicians to think of themselves E of transitioning to accountable care can involve as a group with and what success might look like, we examined • Common patient population the experiences of several AHCs that illustrate • Care delivery goals/plans pathways to meaningful engagement in achieving • Metrics accountable care. The pathways we review in the In the context of looking to develop new mod- accompanying special section include the follow- els of accountability, UMMS created a new set of ing: imperatives: n estructuring decision-making around clinical R n e a leader in the transformation of the quality B strategy, operations and funds flow and value of medical care. n e-balkanization of research funding and D n nnovate in care delivery and payment models I enterprise in addition to technological advancements. n eveloping an integrated approach to faculty D n reate a clinically integrated organization. C hiring n artner with other physicians and hospitals to P n uilding capacity through nontraditional part- B improve health. nerships n ucceed in achieving the triple aim: better S n odeling the future of integrated, accountable M health for populations, better health care for health care patients, and lower costs. n ngaging from “top to bottom” in defining and E UMMS looked at the group employed model leading the transition to accountable care in a characteristics of organizations like the Mayo regional environment Clinic, Cleveland Clinic, Geisinger Health Care, and Kaiser Permanente Medical Groups. What they found were organizations characterized by large multispecialty medical groups, capable of delivering high quality and lower costs. These organizations were permeated by a culture of 25 patient-centeredness and accountability. And they well if they have shared responsibility. attributed their success to critical factors such as The FGP has been able to undertake signifi- physician leadership, governance and manage- cant new integration initiatives. It became a pio- ment, transparency, individual and shared ac- neer ACO with responsibility for 25,000 benefi- countability, and appropriate health information ciaries. It then partnered with other organizations technology.42,43 to create the Physician’s Organization of Michigan The school also looked carefully at the defini- ACO with 82,000 beneficiaries. The FGP also tion of “value” in health care: Value equals appro- supported the need to build a Great Lakes Health priateness times outcomes over costs. The school Information Exchange (in partnership with the IT decided that guidelines must be developed with division of the Michigan Hospital) and began es- criteria for appropriateness and indication for tablishing patient-centered medical homes based procedures. Units and individual providers should on an innovative pharmacist practice model that get no credit for good outcomes and/or low cost links directly with community pharmacists for for procedures that are not indicated. critical point of contact engagement with patients The capacity to operationalize the new roles on medication compliance and related issues. The and values appropriate to accountable care led to FGP has also established new multidisciplinary key structural and management changes within clinics and shared practice guidelines. UMMS. These included the following: Moving management control of ambulatory n ransitioning the faculty practice plans to a T services from the University of Michigan Hospital medical group model to the FGP resulted in the FGP implementing a n ocusing medical groups on care delivery, qual- F management structure and incentives that have ity, safety, collaboration, transparency, and care improved physician satisfaction, patient satisfac- coordination tion, patient access, and margin. n iving medical groups meaningful responsibil- G In primary care, the medical school has un- ity over the clinical enterprise dertaken signature initiatives to embed pharma- n articipating in the new payment models P cists in the patient-centered medical home, to n aking on the responsibilities of pioneering ac- T move to new payment models based on RVUs, countable care organizations and to implement a capitation plus fee-for-service n rganizing to accept bundled payments O model risk adjustment of patient panels to focus n ngaging external physician organizations and E resources. The school recognized the need to hospitals in care improvement identify and train new “comprehensivists” to The structural changes at UMMS built into focus specifically on coordinating and improving ambulatory care services include the following: services for patients with complex conditions. n oving key management responsibilities to the M UMMS has also been developing targeted faculty group practice (FGP) specialty initiatives in departments with pa- n ppointing a medical director responsible for A tients with multiple chronic conditions, high each ambulatory care unit cost, and significant coordination of care issues. n aking a thorough commitment to transpar- M This includes hematology/oncology, cardiology, ency so as to build trust orthopedic surgery, and nephrology. There is also n liminating budgeting and moving to simple E a major initiative to develop acute diagnostic and profit and loss statements with forecasting. treatment centers connected to major clinical The FGP was given responsibility to pay areas as an alternative to emergency department departments based on specialty-specific bench- use for patients with acute exacerbation of their mark relative value units (RVUs). The FGP is chronic disease. This is a concept first successfully responsible for performance against risk. This implemented within the UMMS cancer center to results in faculty salaries being the only clinical reduce hospital admissions in managing neutro- expenses in departments. The medical school has penic fever, dehydration, and pain. found that department chairs will work together Another vitally important medical school 26 initiative has been to learn from other industries n R epresent the interests of UMMS research. about the importance of processes and the manu- n C reate a mechanism for UMMS administration facturing equivalent of medical “handoffs” to qual- and departments to work together to imple- ity and outcomes. The school has been working to ment strategic research goals. build not only the right structures and processes n ake recommendations regarding strategic M but also to develop the frame of mind among the research initiatives and expenditures necessary entire workforce to think of their roles and the role to provide research services and infrastructure of their AHC not as a traditional referral center, but that support the research mission of UMMS. as the integrator of a clinical network. In these and n ct as an advisory body to the UMMS Office of A many other ways, UMMS is well on its way to suc- Research while recognizing that final decision- cess in the era of accountable care. making authority rests with the UMMS dean’s office. De-balkanization of research investment and The RBD is expected to help the UMMS reach enterprise the full scale of its collective potential by creating In order to better establish and achieve institu- a shared vision for the research enterprise, facili- tion-wide scientific research goals, UMMS has tating strategic research initiative development undertaken a significant restructuring of manage- and driving common priorities to tangible out- ment of its science enterprise to enable coordi- comes, identifying strategic research recruitment nated planning and efficient, effective deployment and retention opportunities, guiding institution- and utilization of resources. A research board of ally minded decision making on issues of signifi- directors (RBD) was established with the mis- cant and broad impact, coordinating to minimize sion to work collaboratively to establish a vibrant duplication and leverage specialized resources intellectual milieu that is conducive to scholarly across the UMMS and the university, achieving research activities and to implement a shared sustainability through shared resourcing, pro- institutional vision for the research enterprise of moting and strengthening the financial viability UMMS. of the research enterprise, ensuring continuous The RBD is composed of the dean of UMMS improvement of research operations, and aiding (who chairs the RBD), along with the depart- in strategic master planning of research space for ment chairs; senior leadership concerned with the UMMS as a whole. basic, clinical, and translational research; the chief For more information see: http://medicine. financial officer; and others. The objectives of the umich.edu/medschool/research/strategic-re- RBD are as follows: search-initiative. See also table 3. Table 3. The evolution of the Michigan vision of the successful AHC of the future CurrentFuture Hospital centric Medical group driven Referral center Partner in care Quality assumed Proven quality High cost Proven value (quality/cost) Integrated system Integrator of a clinical network Fragmented education Accountable education 27 Integrated approach to hiring: Univer- active in building and buying physician groups sity of Pennsylvania School of Medicine and expanding their market share. The University Leadership at University of Pennsylvania School of Colorado felt an imperative to partner and of Medicine determined that future success grow or else be marginalized in their marketplace. was going to require achieving the capacity for They decided to look at innovative partnership(s) institution-wide planning and coordination. they might forge to strengthen their clinical busi- In the traditional structure of medical schools, ness and their related missions in education and departments are relatively independent, and research. department chairs define and drive goals from the In 2012, medical school and university leader- point of view of their departments. School leader- ship decided to pursue a relationship with the ship believed that the capacity for institution-wide Poudre Valley Health System (PVHS), a three- planning would best occur by harnessing the hospital system with a successful focus on quality. chairs’ collective knowledge and experience and Truven Health Analytics has named Poudre having them work together to focus on defining Valley Hospital one of its 100 Top Hospitals every and achieving overall school and system goals. year since 2001. In 2012, PVHS received the Mal- UPenn leadership undertook this change, colm Baldridge National Quality Award and was and the chairs were convinced of the benefits of named one of Thomson Reuters’ top 15 health working collectively and sharing responsibility for systems in the nation. institution-wide success. This was accomplished A partnership was formed, and the University in part through an incentive program that had of Colorado Health System (UCHS) was created. the dean and chairs participate in a common UCHS was established as a joint operating com- incentive structure. Half of compensation became pany with a shared bottom line and an 11-mem- dependent on institutional performance and half ber board made up of four medical school on chairs’ own department performance. representatives, five Poudre representatives, and This bringing together of the chairs around two university representatives. Each hospital institutional goals also catalyzed a new process to maintains local management and its own board. centralize faculty hiring so that hiring decisions Each also maintains continuity in its local brand would be made in the context of overall institu- identity in its market. The partnership invested tional goals. substantially in integration of central services like health information technology, finance, human Nontraditional partnerships: resources, marketing, and legal. University of Colorado Health System Not long after, Memorial Hospital in Colorado In 1990, in the wake of a newly competitive envi- Springs became a partnership opportunity, and ronment for hospitals, the University of Colorado the deal was sealed around the idea of creating spun off its university hospital. The move proved a branch medical school campus in Colorado very successful, and the medical school saw ro- Springs. bust growth, supported by its centralized practice The benefits of a closer relationship between plan. The university also very successfully moved these two organizations are numerous: the pediatrics department to the local/regional n ombined academic-based and community- C children’s hospital. Yet even with their ongoing focused medicine, bringing innovative and success, medical school leadership saw the envi- leading-edge care to patients throughout the ronment around them changing quickly. Rocky Mountain region Colorado is a state of 5.5 million people n bility to call on the collaborative care of the A that has become a very competitive health care deepest bench of medical specialists in the market. HCA has seven hospitals with more than region, especially in quickly advancing areas $2 billion in revenues. Centura has 14 hospitals such as oncology, cardiovascular surgery, the with strong capital reserves. Sisters of Charity has neurosciences, and the biosciences four hospitals. All of these health systems are very n op-quality training sites for the next genera- T 28 tion of health care professionals eager to meet and physicians throughout the system as they the needs of diverse populations from the Front worked through the uncertainties of change of Range region to rural areas across the Eastern this magnitude, along with the goal of taking Plains $150 million out of the budget. Integration n ore opportunities for people in underserved M of information technology alone is reported and non-urban areas to get family and complex to have been a huge challenge. Given the new care alliances with community-based physicians Together, these organizations that make up and hospitals, there has been much focus on the UCHS have been recognized in the following the best ways to support the academic enter- ways: prise. The “dean’s tax” continues to be a focus of n ree consecutive Magnet designations by the Th adjustment. American Nursing Credentialing Center, an n Strategic agility: Though still a work in accomplishment only 31 hospitals worldwide progress and evolving to meet stakeholder and have achieved patient needs, the University of Colorado ex- n epeatedly ranked among the best hospitals in R ample demonstrates that AHCs can act quickly the country by US News & World Report, other and decisively when needed, even without a ratings services, and health care organizations burning platform. Senior-level participants that closely examine medical specialties report that good relationships among the lead- n ultiple Nightingale Award winners for excel- M ers of the various institutions have been the key lence in nursing care to enabling this new partnering. As a result, in n edical outcomes better than state averages in M addition to working to build solid systems and many areas relationships throughout the venture, there is n eep involvement in implementing Institute D also a strong focus on succession planning. for Healthcare Improvement, patient safety, and n Responsiveness to community and demo- clinical quality initiatives44 graphics: The vision for five years out is that Overall, the UCHS is pioneering an innovative new regional branches (the clinical branch partnership in which the AHC is not the majority campus and Fort Collins) will have taken hold partner. Though carrying some risks, the model and be much stronger; new clinical capacity is a proving ground for the proposition that AHC will have been developed in local market- and community partners can maintain distinct related areas, like military health care; clinical identities but also move forward with shared val- research will be stronger; and the joint ven- ues to improve patient-centered and accountable ture will be strengthened so as to allow each care that is integrated with support for academic independent entity to be part of a strong and missions. vibrant single system. Overall such new, nontraditional partnerships Results are currently reaping benefits: n Innovative partnerships: All of this was en- n pens doors to bigger markets O gineered within a short time, about one year. n reates larger geographic footprints C Institutional leaders admit that putting together n evelops innovative strategies to thrive in a D such a joint venture in a year challenged the changing marketplace bandwidth of the institution. There were many n rives efficiencies D issues to confront, not the least of which was n trengthens quality S that everyone involved needed to cede some n dds market power and leverage A control to others or to the venture overall. For more information see: http://universityof- Additionally, there were different board and coloradohealth.org. management cultures to merge. n Staff engagement and morale: A key challenge was simply to keep morale high among staff 29 Table 4. Transition from traditional to new model for Emory Transplant Center 2012 2017 Unit- or physician-centered care delivery Patient-centered care delivery organized organized around traditional academic spe- around dominant problems that affect popu- cialties/departments lations served (aligned medical school and clinical administrative units and programs) Care delivered by independent Emory physi- Care delivered by highly effective, optimally cians directing other health professionals composed, interprofessional care teams Variable care plans based on expertise, Consistent, evidenced-based care deliv- experience, and preference of individual ered to Emory standards (standardized providers processes and care plans customized to meet individual patient needs) Basic electronic medical record implementa- Technology-enabled clinical workflow and tion, billing documentation, and regulatory decision support; consistent, cost-effective requirements dominate information technol- care; data capture; and two way patient- ogy priorities provider team communication Clinical analytics limited primarily to hospital Descriptive, predictive, prescriptive, and outcomes comparative analytics guide care delivery across the continuum; continuous improve- ment and innovation Medical school department and clinical ad- Physician and administrative leaders share ministrative leaders focus on partially overlap- clear, aligned, tripartite goals ping goals toward partially shared visions Future of accountable care: n Intense quality oversight: CMS, United Network Emory Transplant Center for Organ Sharing, Scientific Registry of Trans- Transplant medicine is arguably a model of what plant Recipients, payer centers of excellence accountable care can and will look like in the n Bundled payments have been used for a decade years ahead. Transplant medicine has the follow- n Attributable lives n Chronic disease management ing characteristics: n Data rules supreme; mandatory data submis- The Emory Transplant Center (ETC) serves as sion; detailed center-specific public reporting an especially good model for AHCs because it has of short- and long-term outcomes also managed to build an innovative approach to 30 integrative practice and administration within the the CEO of Emory Healthcare, the dean of AHC that builds bridges across traditional AHC the medical school, and the director of Emory silos. The ETC model provides for the following: Clinic, with input from others within the orga- n Team-based care models organized around nization as appropriate. patients and not around individual disciplines n A transplantation section (i.e., a transplant or departments practice) in Emory Clinic was established to n Compensation, incentives, and professional de- include the medical and surgical transplant velopment pathways, for both individuals and faculty essential to the core mission of the teams, that are aligned with ETC, departmental, program. and overall institutional goals n All clinical activities and revenues of these n IT and informatics customized for the pro- faculty are assigned to this new Emory Clinic grams, including optimization of workflows section, e.g., transplant-related activities as and the electronic health record. well as dialysis coverage, endoscopies, etc., to n ETC organized as a platform for patient- avoid splitting clinical income for these faculty centered, team-based learning and a discovery- among multiple Emory Clinic sections. driven development n The ETC brings together the key stakeholders The transition from the more traditional mod- with a role in its success. Participants include el of transplant centers to the new ETC model is the chairs of the medicine and surgery depart- captured in table 4. ments, the CEO of Emory University Hospital, Key principles for the new model include the the COO of Emory Clinic, a representative following: from medical school research administration, n The center director has the authority and re- and a health sciences executive staff representa- sponsibility for the activities of faculty and staff tive. who are active members of the ETC and has n Information transparency ensures that leader- dedicated resources to administer ETC pro- ship can assess performance and make in- grams and achieve its vision. formed decisions about ETC’s program and n Research grants are tracked by schools/units/ impact across AHC entities.45 departments and for ETC. These initiatives to support ETC faculty and n ETC has dedicated space (research and clinical). to share administrative and professional develop- n Faculty and staff who spend significant time ment with related departments provide solutions (more than 50%) in solid organ transplanta- to issues that otherwise vex AHC center devel- tion or who are essential to the mission of the opment and the continuity of center activities. ETC have appointments both in the ETC and The ETC model has been able to achieve within in their departments. These faculty and staff are the AHC environment an unprecedented level managed by ETC leadership. of integrated operations and patient-centered n Performance reviews and development plans accountable care, while also excelling at core aca- for faculty with ETC appointments are done by demic functions in basic and translational science, ETC leadership, with recommendations made training, and faculty development. This model has to the schools/units/departments of appoint- great potential relevance to AHC clinical integra- ment as appropriate. tion initiatives of all kinds. n The ETC fulfills traditional educational respon- The director who led the creation and inte- sibilities of the schools and departments and gration of the ETC has recently been named by takes the lead in pursuit of educational pro- Emory as the new dean of medicine. In this way, grams that build interprofessional teams. Emory is empowering leadership with the experi- n The center director reports to the CEO of ence and vision to lead it into the era of account- Emory Healthcare, the dean of the medical able care. school, and the director of Emory Clinic. For more information see: http://www.emory- n The center director’s review is completed by healthcare.org/transplant-center/. 31 Figure 6. Partners HealthCare overview Brigham and Women’s Hospital Massachusetts General Hospital Founded 1832 Founded 1811 Key statistics FYE September 30, 2013 n otal T operating revenue $10.3 billion nLicensed beds 4,100 Patient service revenue 66% nPhysicians 6,660 Research revenue 16% nEmployees 60,600 Premium revenue 13% nClinical trials 1,650 Other 6% n linical and research C 4,300 nInpatient discharges 165,800 fellows and residents n ives under management L 760,000 Thorough engagement in accountable After many years of largely unsuccessful care: Partners Healthcare insurance coverage and cost-control initiatives, According to its website, Partners HealthCare (see the state of Massachusetts committed in 2006 to figure 6) is a transition to near-universal insurance coverage and an insurance exchange model (the Mas- not-for-profit health care system that is committed sachusetts Health Connector) to provide an to patient care, research, teaching, and service to the accessible insurance marketplace for consum- community locally and globally. Collaboration among ers. The Massachusetts experiment succeeded in our institutions and health care professionals is achieving insurance coverage for more than 98% central to our efforts to advance our mission. of its population within the first year. The state Founded in 1994 by Brigham and Women’s prioritized achieving near universal care ahead Hospital and Massachusetts General Hospital, Part- of tackling the difficult issue of costs. The ACA ners HealthCare includes community and specialty is closely modeled on the Massachusetts experi- hospitals, a managed care organization, a physician ence, and so experience there is distinctly relevant network, community health centers, home care and to what providers, payers, and other stakeholders other health-related entities. Partners is a teaching might expect to encounter throughout the United affiliate of Harvard Medical School.46 States as the ACA is rolled out. Undoubtedly, a key to the success of the Mas- 32 Figure 7. Since 2006 Massachusetts, and now, national health care markets are changing rapidly n 006 2 Massachusetts Universal Coverage Bill n 008 2 Massachusetts Cost Containment Bill n 010 2 Massachusetts Small Business Premium Relief n 010 2 Federal Affordable Care Act n 012 2 Massachusetts Cost Growth Benchmark/Payment Reform sachusetts initiative is that, for years, providers, to reduce cost growth and improve health care insurers, the patient advocacy community, state quality, outcomes, and service.47 officials, and other stakeholders had been engaged Partners Healthcare System is the largest in dialogue (at times contentious) about the best AHC-affiliated provider system in Massachusetts pathways forward to universal coverage, account- and has been deeply engaged in helping define the able care, and cost control. As figure 7 shows, marketplace for health care in Massachusetts. In the rollout and fine-tuning of the Massachusetts light of its experience, Partners defined two broad model has been a multi-year process involving parameters for participation in the accountable a series of legislative initiatives. All stakehold- care marketplace: ers now have many years of experience working 1. Align a strategic path with the overall goals together to navigate the many complex challenges of statewide and federal public policy of expanding access. 2. Be capable of competing in the local or re- Having achieved near-universal coverage gional marketplace on terms that enables Partners through implementation of the bill passed in to control its destiny 2006, the latest major milestone has been the Partners defined a strategic path that involves adoption of a new state regulatory framework for being a comprehensive accountable care provider. managing costs. The 2012 health care cost-control Partners became a Pioneer ACO in November bill set annual state spending targets, encour- 2011, taking on risk in a contract with the CMS aged the formation of accountable care organiza- that incentivizes Partners to manage costs so they tions, and furthered transparency in insurer and increase at a rate lower than the national average. provider payments. It also established an indepen- From Partners’ point of view, state and federal dent state agency to monitor health care system regulation is now emphasizing three major sets of performance and to continue to develop policies tools: 33 1. Payment reform linked to the creation of n Converting to patient-centered medical homes ACOs based in global payments and risk assump- n Changing external structure to develop tion community-centered health villages that can 2. Transparency of pricing (which can turn promote disease prevention and wellness while patients into informed consumers) and, increas- being portals to the full range of integrated care ingly, in outcomes data services 3. Various forms of rate setting n Engaging new partners along the full range of Partners determined that to control its destiny academic and health care missions. it must be guided by three simple but powerful And this is just a sampling of areas of major principles: commitment that are ongoing and are considered 1. Own financial responsibility for patients important priorities. 2. Price must be linked to quality in the mar- Interestingly, though, a recent study of the ketplace Massachusetts experiment summed up one of the 3. Must deliver the right care at the right place big uncertainties for the newest Massachusetts with the right providers cost-control initiatives, which is the uncharted Each of these principles represents an array of future of AHCs: commitments and approaches that the organiza- tion has determined are essential to success in . . . the potential impact on the state’s teaching and this accountable care marketplace. Most impor- research institutions, which are more expensive tant, each of these principles expresses significant than their community counterparts, is unclear. These values and responsibilities that Partners is com- institutions attract substantial federal and private mitting itself to in order to succeed. The values medical research funding, provide high-quality care, include the following: and contribute to local economies through direct n Taking responsibility for patients and popula- employment and related activity in the life sciences. tions, not simply for encounters Compelling them to direct their innovation and n A commitment to transparency highest value creativity toward the production of more efficient (quality/price) delivery models, and the elimination of waste should n A commitment to the teaching, research, and yield positive benefits. However, starving them into collaborative care and systems that provide care decline would be a severe loss for the state.48 where and when it best serves patients. To meet these commitments, Partners is The Partners example illustrates that there is engaged in reforms and innovation across the a broad range of initiatives and re-engineering full spectrum of its organization and operations, required for active and successful engagement in including the following: an accountable care marketplace. It is a model of n Revisiting contracts to meet state cost-growth engagement that seeks to answer the uncertainties targets in the environment by defining their value propo- n Implementing major IT upgrades and conver- sitions and committing the entire institution to sion to centralized IT system them in order to gain and maintain control over n Changing Partners’ internal structure to be- the institution’s destiny, including putting special come a leading provider of population-based efforts into redesigning academic and research care programs to align with overall state and societal n Assuming a greater role in managing overall accountable care goals. and episodic care—especially in coordinating Nevertheless, even in Massachusetts, where for high-risk patients Partners and other AHCs have been engaged for n Creating a new internal performance frame- years in working to develop the state regulatory work with changed incentives structure and in remaking their own systems for n Developing enhanced access to low-cost spe- the responsibilities of accountable care, the future cialty services of these institutions and their core teaching and 34 research missions remain an object of significant blance of control over their own destiny. They are concern. fully engaged in identifying and leveraging their But the situation of Partners and some of the strengths and opportunities, while shedding or re- other AHCs in Massachusetts is not alarming. engineering their weaknesses and liabilities. How They are fully engaged in their environment and many of our AHCs can say the same thing? in shaping it so that they can have some sem- For more information see www.partners.org. References 1. lue Ridge Academic Health Group. Academic B 9. ttp://www.hhs.gov/healthcare/. Accessed Jan. 21, h Health Centers: Getting Down to Business. Washing- 2014. ton, DC: Ernst & Young; 1998. 10. Jost TS. Health Insurance Exchanges and the Afford- 2. lue Ridge Academic Health Group. The Affordable B able Care Act: Key Policy Issues. New York, NY: The Care Act of 2010: The Challenge for Academic Health Commonwealth Fund, July 2010. Centers in Driving and Implementing Health Care Reform. Atlanta: Emory University; 2012. 11. 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Health Affairs. 2012;31:2334- About the Blue Ridge Academic Health Group The Blue Ridge Academic Health Group (Blue ship between academic health professionals and Ridge Group) studies and reports on issues of institutions and their private sector partners and fundamental importance to improving the health sponsors; quality and safety; and improved care of the nation and our health care system and en- processes and innovation through the use of hancing the ability of the academic health center informatics. One key report explored the social (AHC) to sustain progress in health and health determinants of health and how AHCs could care through research—both basic and applied— reshape themselves to address this critical dimen- and health professional education. In 17 previ- sion of improving health. The group also issued a ous reports, the Blue Ridge Group has sought to policy proposal that envisioned a new national in- provide guidance to AHCs on a range of critical frastructure to assure ongoing health care reform, issues. Previous reports identified ways to foster a calling for a United States Health Board; identi- value-driven, learning health care system for our fied opportunities and the most critical challenges nation; enhance leadership and knowledge-man- for AHCs and their partners as the Accountable agement capabilities; aid in the transformation Care Act (ACA) was implemented and examined from a paper-based to a computer-based world; ways in which AHCs could leverage their unique and address cultural and organizational barriers characteristics and capabilities through the ACA to professional, staff, and institutional success to improve health care, research, and training while improving the education of physicians and systems. other health professionals. For more information and to download free Reports also focused on updating the context copies of our reports, please visit of medical professionalism to address issues of www.whsc.emory.edu/blueridge. conflict of interest, particularly in the relation- 37 Previous Blue Ridge Reports 2342. See http://whsc.emory.edu/blueridge/publications/reports.html. Report 17: Health Professions Education: Accelerating Innovation Through Technology. 2013. Report 16: Academic Health Center Change and Innovation Management in the Era of Accountable Care. 2012. Report 15: The Affordable Care Act of 2010: The Challenge for Academic Health Centers in Driving and Implementing Health Care Reform. 2012. Report 14: The Role of Academic Health Centers in Addressing the Social Determinants of Health. 2010. Report 13: Policy Proposal: A United States Health Board. 2008. Report 12: Advancing Value in Health Care: The Emerging Transformational Role of Informatics. 2008. Report 11: Health Care Quality and Safety in the Academic Health Center. 2007. Report 10: Managing Conflict of Interest in AHCs to Assure Healthy Industrial and Societal Relationships. 2006. Report 9: Getting the Physician Right: Exceptional Health Professionalism for a New Era. 2005. Report 8: Converging on Consensus? Planning the Future of Health and Health Care. 2004. Report 7: Reforming Medical Education: Urgent Priority for the Academic Health Center in the New Century. 2003. Report 6: Creating a Value-driven Culture and Organization in the Academic Health Center. 2001. Report 5: e-Health and the Academic Health Center in a Value-Driven Health Care System. 2001. Report 4: In Pursuit of Greater Value: Stronger Leadership in and by Academic Health Centers. 2000. Report 3. Into the 21st Century: Academic Health Centers as Knowledge Leaders. 2000. Report 2: Academic Health Centers: Good Health Is Good Business. 1998. Report 1: Academic Health Centers: Getting Down to Business, 1998. 38 39