The key to Hoag Orthopedic Institute's success — Now a Harvard Business Case

Practice Management

Hoag Orthopedic Institute is a partnership between Hoag Memorial Hospital Presbyterian and physician owners designed to provide specialized orthopedic care in a quality setting for lower costs. This doesn't seem like a revolutionary idea today, but when the concept was hatched nearly a decade ago, many thought it couldn't be done.

"Everything that we have been about from the very beginning has been based on driving value and being a solution to what we believe needs to happen in healthcare reform," says Dereesa Reid, CEO of Hoag Orthopedic Institute.


The facility includes a 70-bed hospital and two ambulatory surgery centers with nearly 300 physicians on staff — 80 being orthopedic surgeons — and they're one of the largest orthopedic providers in California. When developing the center, physician owners embraced teachings from Dr. Michael Porter and Elizabeth Olmsted Teisberg who authored the book "Redefining Health Care."


"Our core strategy is, and we believe should remain, around the value equation," says Ms. Reid. "You run decisions through that filter. Everything we invest in, whether it's time, money or other resources, we are always asking the question about whether this is the best investment to achieve the best outcome at the lowest cost."


The road to transparency
One of the early HOI developers, Robert Gorab, MD, envisioned HOI becoming a leader in transparent clinical outcomes. The facility now publishes annual clinical outcomes data with the third version in the hospital's five-year history schedule to hit the shelves within the next few weeks.


But they didn't take the transparency decision lightly.


"Early on, we had conversations about if we were going to publish this data, should we continue year after year?" says Ms. Reid. "We fundamentally agreed to become who we wanted to be, and that meant transparent outcomes. This helps us show the entire organization, from the executives to the physicians and employees, what our top priorities are and what needs to happen in order for us to achieve our goal."


Now with websites like Hospital Compare and other price tools, patients have more access to quality and cost data than every before. But this is still an evolutionary process.


"I think we'll see improvements in different core measures and quality indicators that the value based purchasing programs will set each year," says Ms. Reid. "We're in the midst of many challenges in healthcare right now, but it's also important to recognize there is still some really great work being done in Washington."


Patient-centric care
HOI has embraced physician ownership and leadership, transparency, new payment models and risk-baring initiatives — much of the debated aspects of healthcare reform. And they've been successful. Some of the hospital's most loyal physicians are non-owners. As a result, Drs. Robert Kaplan and Jonathan Warsh pursued a case study based on the HOI model for the Harvard Business School. It will be used as a teaching tool for students and healthcare executives.


"They took a complete business history, competitive environment and business model analysis in the context of driving value and providing patient-centric care," says Ms. Reid. "They discussed how we have performed so far and how the model of care positions itself as a key player in healthcare reform for orthopedics."


James Caillouette, MD, was another early innovator and visionary for HOI looking to create a better model for healthcare delivery. His journey began more than 15 years ago and he partnered with Richard Afable, MD, the CEO of Hoag Memorial Institute to carry it through.


"Everyone has their own perception of the current state of healthcare, but if we adopt the belief that the way we deliver healthcare today is broken and we've tried to reconfigure our entities to improve healthcare, then we'll have a better patient experience and outcomes," says Ms. Reid. "You have one opportunity to build a new business correctly. We began by recruiting physicians and staff who were vocationally called to deliver care in the orthopedic world."


Risk-sharing payments
HOI physicians also became early participants in risk sharing payment models, including bundled payments with three major commercial payers in California. Their mission for data gathering and transparency go hand-in-hand with bundled payments.


"Bundled payments are a way for providers to accept more responsibility and risk associated with the episode of care," says Ms. Reid. "We know our readmission rates, and we have low infection rates, but when you're taking bundled payments for it, you're additionally accountable. We didn't participate in the Medicare project, but I believe there have been some successful models coming out of there as well."


In addition to individual initiatives, HOI joined the National Orthopedic and Spine Alliance, which includes large orthopedic-focused organizations from around the country. Cleveland Clinic, The CORE Institute, OrthoCarolina, OrthoCalifornia and Rothman Institute — to name a few — are founding participants who focus on collecting data and work with self-insured employers and payers to provide quality care.


HOI also includes two ambulatory surgery centers, which support the trend toward outpatient surgical care.


"We are starting to do some total hip replacements outpatient and I'm excited to see what we can do with the ASCs," says Ms. Reid. "They are great lower cost, high quality venues of care."


The Harvard Business case is setting HOI as an example, but can a similar model be implemented elsewhere?


"I think it could," says Ms. Reid. "Today your traditional hospitals are employing service line leadership and that's one way to create care around a certain condition. The problem is the diminished return. Typically, there are legacy chains of command and silos of clinical care that you have to cut through in order to improve and coordinate patient centered care. If you're serious about creating a focus shop and willing to step beyond and move away from the traditional constraints, I think it's possible to replicate this model."


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