In this episode, Byron Jobe, President, Chief Administrative and Financial Officer of Vizient, discusses the results of their post-election healthcare survey including C-suite perceptions of potential ACA changes, merger and acquisition activity, and value-based reimbursement.
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Michael Passanante: Hi, this is Mike Passanante. Welcome back to the Hospital Finance Podcast. Today, I’m joined by Byron Jobe.
Byron is the President and Chief Administrative & Financial Officer at Vizient. Byron leads a variety of functions at Vizient including finance and accounting, information technology, marketing and strategic communications, offering strategy, development and innovation, mergers and acquisitions integration and sales operations.
Byron has joined us today to walk us through the results of Vizient’s post-election healthcare pulse check. Byron, welcome to the program.
Byron Jobe: Good morning. And thank you.
Mike: Byron, first, can you just tell our listeners a little bit about what Vizient does?
Byron: Sure, happy to. Vizient is the largest member-driven healthcare performance improvement company in the country. We provide innovative data-driven solutions, expertise and collaborative opportunities that address provider supply, clinical and operational needs, all of which really leads to improved patient outcomes and lower costs.
Our company serves more than half of the acute care provider market in the country. And we actually also serve more than 20% of the ambulatory market.
We have a very diverse membership. Our customer base includes academic medical centers, pediatric facilities, committee hospitals, integrated health delivery networks and non-acute healthcare providers. We also represent just a little over a hundred billion in annual purchasing volume.
The Vizient brand now represents the integration of former companies’ VHA, University HealthSystem Consortium, Innovation and the recent combination with MedAsset’s Spend and Clinical Resource Management segment which also includes Sg2.
Mike: Thanks for that, Bryon. So, as I’ve mentioned, we are here to talk about the post-election healthcare pulse check. Byron, first, can you tell us who you surveyed and about how and when it was conducted?
Byron: Sure, happy to. The survey was conducted online. It was sent out. Our respondents sent us in their responses between December 1st and December 14th of 2016. We sent the survey out to all our member healthcare C-suite leaders (our CEO’s, COO’s, CFO’s, et cetera) as well as hospital pharmacy executives.
The recipients received an email with a hyperlink for the survey. And overall, we had about 222 respondents that represented over 200 healthcare organizations.
Mike: And the first question that you asked in the survey was, “Assuming the Trump administration repeals or changes provisions under the Affordable Care Act, what aspects do you believe should be kept?” What did you find in that question?
Byron: Overall, the survey was really focused on the ACA. And we asked our respondents to choose from a number of answers. So they were not limited to any one single answer. And based on their responses, we found an overwhelming majority of hospital C-suite leaders and hospital pharmacy executives want to keep the ACA’s protection of patients with pre-existing conditions in place.
And the answers are followed closely by a similar set of financial issues that included expanded Medicaid coverage.
We also recognize that today’s hospitals are facing huge financial pressures and the idea that their reimbursement or financial health could be impacted is of great concern to them.
Mike: Byron, next, you asked, “Assuming the new administration keeps the Affordable Care Act in whole or in part, what aspects do you believe should be eliminated?” What did you find there?
Byron: Now, again, this is the question that asked them to choose from a broad set of responses. And so, again, they were not limited. But we did some variation here between the C-suite and the pharmacy leaders. And I think the reason for this is because the two audiences bring two different perspectives and priorities within their organizations.
In terms of the C-suite leaders, their highest response rate was really focused around eliminating alternative payment models. And we recognize that these payment models represent a new approach that not all healthcare organizations are comfortable with yet.
And those newer to this care model, some are concerned about being judged on care beyond their scope of influence.
Interestingly, the elimination of the individual mandate scored very high with both audiences. And at the same time, almost 28% of the C-suite leader said that none of the ACA elements should be eliminated. That was their third highest answer. And we believe this is where you see some of the personal political belief of individuals possibly coming through in the survey.
In addition, eliminating mandated coverage on the other hand while simultaneously avoiding lower reimbursements and uncovered patients on the other, this represents goals that are seemingly at odds with one another and this also highlights the complexity of funding the healthcare reform model that fully addresses all their needs.
All providers are really focused on ensuring that patients are covered and able to access and afford the medical care that they need. But finding consensus on how to fund that coverage is much more difficult.
Mike: Byron, the third question on the survey was, “There are many open questions at this point following the election. What gives your facility the most cause for concern?”
Byron: It’s almost most interesting to start at the bottom of the survey respondents or the bottom of the respondents around their questions. Only 1.4% of all respondents had no concerns. So, clearly, the uncertainty facing healthcare executives right now is of great concern.
We hear this from our own members who we serve. The sooner they have concrete plans to prepare for, the better.
The greatest concern by far was the fear of lower reimbursements; fewer insured/covered patients and fear of the unknown were the next highest.
As we’ve discussed earlier, the financial pressures facing hospitals are significant. They generally must operate in very thin margins, but they continue to strive to increase the quality of care they provide to the patients and communities. These dueling goals of balancing cost and quality constantly stress the healthcare system. And we see that day-to-day in working with our members.
As early as 2009, hospitals agreed to substantial cuts in Medicare and Medicaid reimbursement. These organizations anticipated that those cuts would be offset by increased payments from customers who are newly insured under the ACA program.
But if there are changes in that system under the repeal/replacement, hospitals need to ensure that they can continue to have financial viability to serve patients and communities.
And speaking on behalf of providers we serve, we believe it is critical that any changes to the healthcare law include reimbursements and insurance coverage that are at least equal to (if not better) than the current amounts.
Mike: Next you asked respondents to rank the factors that they believe could have the greatest influence over hospital merger and acquisition activity under a Trump administration. What were the key factors that executives noted?
Byron: In talking to our member organizations, we often hear from them that creating scale and greater capital capacity is a big driver of why they’re wanting to come together. They recognize in the new healthcare environment that without that scale and access to capital, they’re going to be limited in investments in the future.
As we looked at the survey responses, again, there are some key drivers to what’s driving M&A activity—changes in reimbursement in the Medicare and Medicaid front; obviously, the changes in health policy and some of the reform coming out of Washington; followed by just even local market conditions.
So, overall, I would say financial pressures by outside factors appear to have the highest influence on these M&A activities.
Mike: Question five on your survey, “The pharmaceutical industry has recently been under fire for egregious price spikes as well as ongoing drug shortages. How would you like to see a Trump administration focus on the pharmaceutical industry?” What did they say, Byron?
Byron: Well, this is a tough one. I think everybody is really focused on how to reduce drug prices in the industry. I’m not sure there’s an easy answer. There’s certainly a lot of enthusiasm particularly among the hospital pharmacy leaders to address drug price spikes.
What we saw in the survey is about 55% want to see the administration focus more in this area; and more than 40% of the executives also support eliminating the pay for delay practice for branded pharmaceutical companies.
As a general rule, rational pricing is always a concern for our members. And we have heard from many of them that they have great concern about the pricing tactics of certain drug companies.
The other thing I would say is that managing drug cost had become a daily challenge for members as some drug prices continue to rise. And in an effort to help curb those costs for members, we at Vizient have actually taken an active role on advocating on behalf of our members in this area.
Just to give you an example, we’ve worked with a trade association, the Healthcare Supply Chain Association, and we’ve taken a leadership role in the development of letters to Congress and the FDA urging them to expedite the review of new, generic entrants into the market.
Ultimately, increase in competition among manufacturers we think will help lower drug prices. We believe this will not only accelerate competition, but also serve to deter existing manufacturers from making unreasonable price increases in the future.
Now, we believe the FDA plays a critical role in the safety of our nation’s supply chain. We also believe that competition in the generic market can help alleviate price spikes and shortages. So, I would say just an expedited revenue and appropriate prioritization in this area would be a key focus.
Mike: And finally, you asked executives to rank their top three priorities for 2017. What were they?
Byron: The answers were pretty close. In terms of the ranking exercise, what we found is the top three priorities were: 1) reducing clinical variation across the care delivery system, 2) migrating toward value-based care models and 3) integration of existing technology systems.
Mike: Byron, why do you think reducing clinical variations top the list of 2017 priorities?
Byron: I think most of our members recognize—and this has been front and center agenda for both them and Vizient. They recognize that variation in the delivery of care is the single largest driver of inefficiency in our healthcare system today.
It’s a really passion for many of our members. And it addresses multiple issues, both in terms of cost reduction, elimination of waste, standardizing around utilization of supplies and other variables to the delivery of care. And ultimately, it all gets to better outcomes for the patient.
And so in this area, we continually focus with our members to help them balance both reducing cost, but improving quality within their organizations.
Mike: When you consider the survey results, it seems that reimbursement is a top issue for these executives. And they seem ready to embrace payment models that are based on delivering value. What are your thoughts on that?
Byron: I think that’s generally true. Every hospital we work with is very focused on delivering the highest possible quality of care that they can. They’re truly focused on patient care and quality care delivery.
Payment models that encourage good patient outcomes and higher quality care are generally quite popular. We’ve seen bipartisan evidence of this in the recent MACRA decision. Patients are generally supportive, as are healthcare providers. And it’s really hard to argue with. But it does hinge realistically on ensuring that those payments are enough to help hospitals stay financially viable. And many hospitals want to ensure that they’re realistically able to impact and control those value drivers.
I think this is another reason as we think about reimbursement why organizations are focused on M&A and scale to try to create greater leverage across their fixed cost as reimbursement models change.
Mike: It was notable to see that executives are interested in value-based reimbursement, but somewhat wary perhaps of the alternative payment models that are part of the ACA. Why do you think this is so?
Byron: Yeah, this is an interesting issue. The responses from the C-suite leaders were fairly split on value-based payments as you can see from the survey. And extrapolating from that, we believe that facilities who are well underway with implementing value-based and alternative payment models are those that believe that they’re better able to impact the cost and quality of care across the continuum and are more favorable towards value-based payments.
Whereas those that are not yet far along with the implementation of value-based payments might be less capable of their ability to impact and control all factors or cost across the continuum of care. They’re less supportive and more concerned about the ultimate impact of the reimbursements.
Ultimately, it’s a complex issue that varies depending on the healthcare organizations’ situation, their local market, the patient mix/dynamics in their market, other competitive dynamics in the market as well as their care delivery model.
That said, we also believe there’s a broad consensus among hospital leaders that the traditional fee-for-service payment model alone is not sustainable. Meaningful change is needed to reduce the rising cost of America’s healthcare system. And regardless of government policy, we believe healthcare organizations will continue to focus on balancing cost and quality with their ultimate focus always driving the best possible outcomes for their patients.
We really do believe that value-based payments will continue to be a part of this equation, but understanding the details around the implementation is still not yet clear.
Mike: And for those that want to look at the results of this survey, we will have a link to them from the transcript of this interview on our website.
Byron Jobe, thanks so much for joining us today on the Hospital Finance Podcast.
Byron: Alright, thank you.