Hoag Orthopedic Institute, a physician-owned orthopedic hospital in Irvine, Calif., opened just in time to meet the deadline set forth by healthcare reform. The idea for Hoag Orthopedic Institute was formulated around three years ago as a for-profit joint venture between a not-for-profit community hospital, Hoag Memorial Presbyterian Hospital, and 35 orthopedic surgeons from two different orthopedic groups. The hospital was built and opened in Nov. 2010, with 51 percent ownership going to the hospital and 49 percent going to the physicians. However, the governance of the institution is 50-50, and it's run by physicians.
"Both orthopedic groups that joined to form the institute had been in the surgery center business for many years and developed management expertise, so we felt we could take that expertise to the inpatient hospital setting," says Alan Beyer, MD, an orthopedic surgeon leader at Hoag Orthopedic Institute. "Hoag Memorial Presbyterian Hospital agreed as well. They saw we did a great job with our ASCs and felt we could take that to our new venture."
Hoag Orthopedic Institute currently includes two ASCs and one 70-bed inpatient hospital where the surgeons expect to perform 12,000 surgeries per year, with 4,500-5,000 of those being inpatient operations. Dr. Beyer and Rick Afable, MD, MPH, president and CEO of Hoag Memorial Hospital Presbyterian, discuss the challenges and opportunities presented by a physician-owned orthopedic hospital.
1. Managing a hospital is different from managing a surgery center. One of the first things that the physician leaders at Hoag Orthopedic Institute realized was that managing an inpatient facility came with a different set of challenges than managing an outpatient surgery center. "Managing a hospital is not just like managing an ASC on steroids," says Dr. Beyer. "There are a lot of regulatory and supply issues we had to learn about. It was definitely a learning experience, but we were lucky to have the leadership of the hospital to fall back on."
When new issues arose at the hospital, the physicians were able to call upon the leaders at Hoag Memorial Presbyterian Hospital to overcome these new challenges. "When we had questions, we had a built-in tutoring system from them," he says. "They gave us enough freedom to allow us to run the hospital the way we wanted to run it, but when it came to logistics, we had a team of people who were experienced at running a hospital for more than 50 years."
2. Aligning with hospitals has become necessary for success. Even before President Obama signed the Patient Protection and Affordable Care Act into law, Dr. Beyer, Dr. Afable and their colleagues felt that the healthcare environment was changing and the best way to remain successful would be through complete alignment. "We saw a need to disrupt the way healthcare was being delivered in the orthopedic world based on what was coming down the pipe, especially now with healthcare reform," says Dr. Beyer. "We saw that we couldn't just keep doing things the same old way: cut costs and we'll survive. The hospital and physicians realized that there had to be a disruption in the way we delivered care."
For Dr. Beyer and his colleagues, this disruption meant forming an unprecedented alliance with Hoag Memorial Presbyterian Hospital to raise the quality of care while simultaneously lowering costs. The two groups saw that the only way to do this was through complete alignment; both entities needed to have "skin in the game" for motivation to work together in accomplishing their goals. "Lowering implant costs through vendor negotiations, meeting quality metrics and making care patient-centric were all our goals, and they could all be accomplished if the physicians and hospital were completely aligned," says Dr. Beyer.
This alignment has placed Hoag Orthopedic Institute at the forefront of providing a new type of orthopedic care, which is now dictated by healthcare reform. "The healthcare challenges we were seeing four years ago aren't the same as what we are seeing now," says Dr. Afable. "We saw the direction that healthcare was going and we wanted to do something different right away rather than wait for healthcare reform to make us do it. We are ahead of most hospitals in that respect."
3. Some people may need lots of convincing that this model can be successful. Complete alignment, as the surgeons and hospital have done with Hoag Orthopedic Institute, is different from the traditional cost-saving methods hospitals use: implementing a leaner program, cutting staff members, cutting services and trying to sign more surgeons into employment agreements to make the wholly owned entity more competitive and improve market share.
"We took a contrarian view to this scenario: if we really want to improve outcomes and cut care costs in a challenging healthcare world, we decided to partner with physicians rather than control them," says Dr. Afable. "It was a challenge to get people to agree that this was the way to go. The hospital board and physicians had to accept we could do much better as an aligned source of care rather than employment or going off in our own directions."
He recognizes that the hospital took a leap of faith when entrusting the surgeons to run HOI, which meant sacrificing the traditional control hospitals have over their projects. Gathering all the surgeons and pointing them in the same direction was also challenging. "As a physician leader, we had to set an example for the other surgeons," says Dr. Beyer. "We had to learn to take more time away from our clinic for the administrative duties. In our community, the orthopedic surgeons are light-years ahead of other specialists in realizing that you have to come together to shoulder the burden because it's the right thing to do."
Once the hospital and physicians were on board with the alignment, both groups were able to see improvement in quality of care and realize cost-savings.
4. Building trust between hospitals and surgeons. The orthopedic surgeon groups and Hoag Memorial Presbyterian Hospital had a longstanding tradition of trust between them going into the venture, but that isn't the case in every community. In many places, the relationship between specialists and hospitals has been adversarial in the past, which makes alignment harder between the two groups. Since both groups were already friendly in this case, they were able to create a model for care that fulfilled their unique vision. In the arrangement, the hospital rolled its orthopedic service line into HOI, essentially handing over those patients to the surgeons at the new facility. The surgeon leaders also had to sacrifice their time to complete a large amount of administrative work while also staying abreast of their clinical responsibilities.
"The beauty of this venture was that there was a long tradition of trust between the physicians and hospitals," says Dr. Beyer. "We previously had done a joint venture on ASCs, so when one side said they needed something to be done differently, everyone realized it would be for the common good. That trust can't be forced or happen overnight, but you need to have that trust because a deal like this is hard to move forward if one or both entities don't go into it trusting each other."
Alignment between hospitals and surgeons on a venture such as Hoag Orthopedic Institute shouldn't be discounted just because there has been strife between the two groups in the past. Beginning to build trust now can help accomplish grander goals and alignment in the future. "When trust has been developed, you are more willing to take chances to accomplish things you wouldn't have been able to accomplish otherwise," says Dr. Afable. "Even in the absence of clear, unadulterated trust, you can move forward with a project. You have to have some element of trust, but if you are waiting for complete trust, it might never happen."
5. Designing a facility for orthopedic care. Hoag Orthopedic Institute was able to move into a vacated hospital that was refurbished to specifically accommodate orthopedic patients. "The hospital was able to be designed as a truly orthopedic-focused hospital based on the need for things like large sterilization trays, sterilization stations by the ORs and optimal patient flow to and from the PACU and OR," says Dr. Beyer.
The hospital's work process was also devised for maximum efficiency in delivering orthopedic care. The physicians run the hospital like an ASC with extended hours; the ORs are run on an eight-hour instead of a four-hour shift to increase productivity by 20 percent. There is also a built-in nurse navigator program where a nurse is assigned to patients, shepherding them from the preoperative through the postoperative follow-ups. "From the ground up, the facility was designed to deliver orthopedic services," says Dr. Beyer. "These patients aren't sick; they just have a problem with their joints that can be fixed. We are trying to promote an environment of wellness, which is hard to do for a patient who has just had a major surgery. We want our facility to seem more like a hotel than a hospital."
6. Succeeding as a physician-owned hospital. Currently, there is a ban on physician-owned hospitals, meaning no new physician-owned hospitals can begin construction, and many projects have been abandoned. Hoag Orthopedic Institute just made grandfathering status by opening six weeks before the deadline. While the legislators in Washington, D.C., may have issues with POHs, there is growing evidence that they can lower healthcare costs, increase efficiencies and provide as good or better quality of care than regular hospitals.
"There has been an article published in the Journal of Bone and Joint Surgery that shows physician-owned hospitals have lower cost and higher efficiency than other facilities," says Dr. Beyer. "The current legislation is the major road block right now in our model gaining more traction around the country. The other is the enlightenment of hospital leadership. Our CEO is an MD, and most hospital administrators don't realize this is the kind of bold step they need to take in order to move forward."
There are several concerns legislators have with physician-owned hospitals, including that they will cherry pick the most profitable cases, stop treating uninsured patients and corrupt the system to optimize profits. During its year in existence, physician leaders at Hoag Orthopedic Institute have shown that POHs can be successful while overcoming these concerns.
"We came to the agreement early on that we would care for all patients regardless of their ability to pay," says Dr. Afable. "We have fulfilled the obligation that Hoag previously provided in caring for the underserved. That was a requirement of Hoag to go forward with this and the physicians have been visionary enough to realize that providing care for all patients is an important part of services for a hospital that wants to be the dominant provider in the community."
7. Orthopedic POHs have the potential to flourish. Dr. Afable says that preliminary data from HOI suggest significant improvement in patient satisfaction, quality of care, reduction in complications and the cost of care per unit of service has gone down, primarily because of the improvements in the care process and ability to work with vendors for a better implant price.
"We have shown many of our benchmarks improved, and now we are looking at the data representing functional outcomes," says Dr. Afable. "We are hoping to report data showing functional outcomes of patients at Hoag are superior to the care previously served at Hoag Memorial Presbyterian Hospital, and nationally. We think that functional outcomes are where the rubber hits the road, telling us how well patients do in the long run because of our care."
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Hoag Orthopedic Institute currently includes two ASCs and one 70-bed inpatient hospital where the surgeons expect to perform 12,000 surgeries per year, with 4,500-5,000 of those being inpatient operations. Dr. Beyer and Rick Afable, MD, MPH, president and CEO of Hoag Memorial Hospital Presbyterian, discuss the challenges and opportunities presented by a physician-owned orthopedic hospital.
1. Managing a hospital is different from managing a surgery center. One of the first things that the physician leaders at Hoag Orthopedic Institute realized was that managing an inpatient facility came with a different set of challenges than managing an outpatient surgery center. "Managing a hospital is not just like managing an ASC on steroids," says Dr. Beyer. "There are a lot of regulatory and supply issues we had to learn about. It was definitely a learning experience, but we were lucky to have the leadership of the hospital to fall back on."
When new issues arose at the hospital, the physicians were able to call upon the leaders at Hoag Memorial Presbyterian Hospital to overcome these new challenges. "When we had questions, we had a built-in tutoring system from them," he says. "They gave us enough freedom to allow us to run the hospital the way we wanted to run it, but when it came to logistics, we had a team of people who were experienced at running a hospital for more than 50 years."
2. Aligning with hospitals has become necessary for success. Even before President Obama signed the Patient Protection and Affordable Care Act into law, Dr. Beyer, Dr. Afable and their colleagues felt that the healthcare environment was changing and the best way to remain successful would be through complete alignment. "We saw a need to disrupt the way healthcare was being delivered in the orthopedic world based on what was coming down the pipe, especially now with healthcare reform," says Dr. Beyer. "We saw that we couldn't just keep doing things the same old way: cut costs and we'll survive. The hospital and physicians realized that there had to be a disruption in the way we delivered care."
For Dr. Beyer and his colleagues, this disruption meant forming an unprecedented alliance with Hoag Memorial Presbyterian Hospital to raise the quality of care while simultaneously lowering costs. The two groups saw that the only way to do this was through complete alignment; both entities needed to have "skin in the game" for motivation to work together in accomplishing their goals. "Lowering implant costs through vendor negotiations, meeting quality metrics and making care patient-centric were all our goals, and they could all be accomplished if the physicians and hospital were completely aligned," says Dr. Beyer.
This alignment has placed Hoag Orthopedic Institute at the forefront of providing a new type of orthopedic care, which is now dictated by healthcare reform. "The healthcare challenges we were seeing four years ago aren't the same as what we are seeing now," says Dr. Afable. "We saw the direction that healthcare was going and we wanted to do something different right away rather than wait for healthcare reform to make us do it. We are ahead of most hospitals in that respect."
3. Some people may need lots of convincing that this model can be successful. Complete alignment, as the surgeons and hospital have done with Hoag Orthopedic Institute, is different from the traditional cost-saving methods hospitals use: implementing a leaner program, cutting staff members, cutting services and trying to sign more surgeons into employment agreements to make the wholly owned entity more competitive and improve market share.
"We took a contrarian view to this scenario: if we really want to improve outcomes and cut care costs in a challenging healthcare world, we decided to partner with physicians rather than control them," says Dr. Afable. "It was a challenge to get people to agree that this was the way to go. The hospital board and physicians had to accept we could do much better as an aligned source of care rather than employment or going off in our own directions."
He recognizes that the hospital took a leap of faith when entrusting the surgeons to run HOI, which meant sacrificing the traditional control hospitals have over their projects. Gathering all the surgeons and pointing them in the same direction was also challenging. "As a physician leader, we had to set an example for the other surgeons," says Dr. Beyer. "We had to learn to take more time away from our clinic for the administrative duties. In our community, the orthopedic surgeons are light-years ahead of other specialists in realizing that you have to come together to shoulder the burden because it's the right thing to do."
Once the hospital and physicians were on board with the alignment, both groups were able to see improvement in quality of care and realize cost-savings.
4. Building trust between hospitals and surgeons. The orthopedic surgeon groups and Hoag Memorial Presbyterian Hospital had a longstanding tradition of trust between them going into the venture, but that isn't the case in every community. In many places, the relationship between specialists and hospitals has been adversarial in the past, which makes alignment harder between the two groups. Since both groups were already friendly in this case, they were able to create a model for care that fulfilled their unique vision. In the arrangement, the hospital rolled its orthopedic service line into HOI, essentially handing over those patients to the surgeons at the new facility. The surgeon leaders also had to sacrifice their time to complete a large amount of administrative work while also staying abreast of their clinical responsibilities.
"The beauty of this venture was that there was a long tradition of trust between the physicians and hospitals," says Dr. Beyer. "We previously had done a joint venture on ASCs, so when one side said they needed something to be done differently, everyone realized it would be for the common good. That trust can't be forced or happen overnight, but you need to have that trust because a deal like this is hard to move forward if one or both entities don't go into it trusting each other."
Alignment between hospitals and surgeons on a venture such as Hoag Orthopedic Institute shouldn't be discounted just because there has been strife between the two groups in the past. Beginning to build trust now can help accomplish grander goals and alignment in the future. "When trust has been developed, you are more willing to take chances to accomplish things you wouldn't have been able to accomplish otherwise," says Dr. Afable. "Even in the absence of clear, unadulterated trust, you can move forward with a project. You have to have some element of trust, but if you are waiting for complete trust, it might never happen."
5. Designing a facility for orthopedic care. Hoag Orthopedic Institute was able to move into a vacated hospital that was refurbished to specifically accommodate orthopedic patients. "The hospital was able to be designed as a truly orthopedic-focused hospital based on the need for things like large sterilization trays, sterilization stations by the ORs and optimal patient flow to and from the PACU and OR," says Dr. Beyer.
The hospital's work process was also devised for maximum efficiency in delivering orthopedic care. The physicians run the hospital like an ASC with extended hours; the ORs are run on an eight-hour instead of a four-hour shift to increase productivity by 20 percent. There is also a built-in nurse navigator program where a nurse is assigned to patients, shepherding them from the preoperative through the postoperative follow-ups. "From the ground up, the facility was designed to deliver orthopedic services," says Dr. Beyer. "These patients aren't sick; they just have a problem with their joints that can be fixed. We are trying to promote an environment of wellness, which is hard to do for a patient who has just had a major surgery. We want our facility to seem more like a hotel than a hospital."
6. Succeeding as a physician-owned hospital. Currently, there is a ban on physician-owned hospitals, meaning no new physician-owned hospitals can begin construction, and many projects have been abandoned. Hoag Orthopedic Institute just made grandfathering status by opening six weeks before the deadline. While the legislators in Washington, D.C., may have issues with POHs, there is growing evidence that they can lower healthcare costs, increase efficiencies and provide as good or better quality of care than regular hospitals.
"There has been an article published in the Journal of Bone and Joint Surgery that shows physician-owned hospitals have lower cost and higher efficiency than other facilities," says Dr. Beyer. "The current legislation is the major road block right now in our model gaining more traction around the country. The other is the enlightenment of hospital leadership. Our CEO is an MD, and most hospital administrators don't realize this is the kind of bold step they need to take in order to move forward."
There are several concerns legislators have with physician-owned hospitals, including that they will cherry pick the most profitable cases, stop treating uninsured patients and corrupt the system to optimize profits. During its year in existence, physician leaders at Hoag Orthopedic Institute have shown that POHs can be successful while overcoming these concerns.
"We came to the agreement early on that we would care for all patients regardless of their ability to pay," says Dr. Afable. "We have fulfilled the obligation that Hoag previously provided in caring for the underserved. That was a requirement of Hoag to go forward with this and the physicians have been visionary enough to realize that providing care for all patients is an important part of services for a hospital that wants to be the dominant provider in the community."
7. Orthopedic POHs have the potential to flourish. Dr. Afable says that preliminary data from HOI suggest significant improvement in patient satisfaction, quality of care, reduction in complications and the cost of care per unit of service has gone down, primarily because of the improvements in the care process and ability to work with vendors for a better implant price.
"We have shown many of our benchmarks improved, and now we are looking at the data representing functional outcomes," says Dr. Afable. "We are hoping to report data showing functional outcomes of patients at Hoag are superior to the care previously served at Hoag Memorial Presbyterian Hospital, and nationally. We think that functional outcomes are where the rubber hits the road, telling us how well patients do in the long run because of our care."
Related Articles on Orthopedics:
7 Healthcare Reform Changes Affecting Orthopedic Surgeons
Will Spine Surgeons be the Next Specialists Scooped Up by Hospitals? 6 Responses
8 Reasons for Orthopedic and Spine Surgeons to be Optimistic About 2011