Grand Rounds-Neurosurgery Practice Models for the Future: Challenges and Opportunities

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- Hello, ladies and gentlemen, thank you for joining us. This session is dedicated to a special discussion regarding opportunities and challenges for future and innovative new models for managing neurosurgical practices. Our guest is Dr. Dong Kim. He really has done a spectacular job, jump-starting the neurosurgery department at The University of Texas, Houston and Mischer Neuroscience Institute. I'm very happy to have you with us today. He's going to talk to us about how he has been able to excel his neurosurgery department in our challenging times. Dong thanks again, and please go ahead.

- Thank you, Aaron, for the opportunity and the introduction. I think that all of us who practice neurosurgery today know that we are under stress, the reimbursements have been declining in real dollar terms. If you factor in inflation, that's even worse. Regulatory and requirements are increasing. Compensatory mechanisms are really reaching its limits. Many of us have done more volume, and so revenue per cases decline, and we have practices that probably cannot reach any larger in size. Further, the implementation of the affordable care act will have a significant impact in ways that we may not even be able to predict today. These changes are affecting every type of practice. If you own a small, private practice, there are questions as to whether you can do contracting well, How do you meet the regulatory requirements? If you're in a group practice, there are questions about whether you're subsidizing other types of specialty positions or primary care doctors. In academic practices there are questions of subsidizing research and teaching. In my institution, which is a state medical school. The state support has been declining. And as a result, many more of us are becoming employed directly by hospitals, and by employment I don't mean like a faculty member who has an employment contract, but a neurosurgeon who is employed by a hospital system to provide services. The questions we might ask about that, is this what we want and how much autonomy do we have. In this presentation I'm hoping to present some ideas to you that might be helpful in thinking about what you are going to do going forward,. And I am going to start with the following premises, I think first, we all went into medicine to be physicians and surgeons, and we have to put our patients first. For our livelihoods and for the health of our specialty, I'm going to submit to you that we cannot just live off of the professional fees in the future. We are going to have, to have other sources of income. The health care system is going to change dramatically and we're going to have to adapt to it. And from my own belief, we as neurosurgeons know best how to treat our patients and know best how we should practice and manage ourselves. And I would submit to you that maintaining autonomy is very important. So what are the possible solutions? I think the first thing is that depending on your region or city or location of practice, the situation is going to be different. There are three major variables. What kind of physician groups are there? How are they organized? What kind of hospitals? How many hospital systems and what kind of payers. I'm going to talk to you in some detail about Houston, but this is quite variable. There are certain areas where there's only one position that can provide a service, like in a rural area. There are some states with one major insurance company and so on, and there are exceptions that I've noted. And for you to think about what strategy will work best for you, you're going to have to take account the variables in your region. So this is the Texas Medical Center with downtown Houston in the background. I'm going to talk to you specifically about my experience at the university of Texas and within the Memorial Hermann hospital. And in Houston, there are many small physician practices. And interestingly enough, the average physician practice size in Houston is 1.7 doctors, goes to show you how many solo and two or three doctor groups exist. Even among neurosurgeons, there are many neurosurgeons that are in small one or two surgeon practices. So that is a significant factor for us. We also have several large hospital systems that are represented here, including my hospital system HCA, Methodist, and then also many independent hospitals. And there are lots of doctor on the hospitals in the area. Finally, every major type of insurance company is represented from Cigna to Blue Cross to United, to Aetna. Finally, this is a point I'm going to be making again in the future, large employers, like the City of Houston, United Airlines, ExxonMobil, Houston Independent School District are increasingly looking to contract with one person to provide a sum total of services for all their employees for the whole year. And that is going to be a sea change. So even aside from what's coming to us from the affordable care act, a lot of the large employers are going to be driving change on their own, and I will be discussing more about that. So what's happened to our program in the last five years. I'm going to describe this to you in some detail. I also feel that the next five years we're going to have to make significant changes from where we've been, and what's been successful before may not help us be successful going forward. So I became chairman in October of 2007. So I've been here just about five and a half years now. I came here for the university of Texas, neurosurgery department, but also because I had the opportunity to work at a very large hospital system. Memorial Hermann is 11 acute care hospitals at 3,600 beds in Houston. And we decided we're going to do something integrated for neuroscience and the whole system. The neurosurgery department was centered only at one campus at that time and had very few clinical faculty and even fewer PhDs. You can see some aspects of our program and nature deficit for a academic medical center was it, we had no residency and really not much teaching. So this is our healthcare system. The Mischer Science Institute is based at our Texas medical center location, which is our largest hospital. It's licensed for just under a thousand beds. We also have two 600 bed hospitals at Southwest and Memorial City, and the rest are smaller hospitals and they are spread out throughout the city of Houston. So even before I took this job, I wanted to think about what would be an ideal practice situation, and I felt that I had an opportunity to craft an arrangement that would set us up for the future. And first and foremost, as I mentioned before, I think maintaining autonomy and having neurosurgeons make decisions for our lives and our patients was very important. I felt that we needed to be in a medical school and have the benefits of being in a medical school and contribute to the school, but mitigate some of the problems that many of us in academic practices face today. We wanted to be able to support a traditional academic type practice in a tertiary medical center, but also because we're looking at setting up a system-wide program with some of our surgeons in community hospitals or smaller hospitals, we needed to be able to accommodate a private practice type situation, and we needed a program in every part of the city. Finally, and this was very important. I did not want to be in a situation where I was negotiating with hospitals on a annual basis or define subsidies. You know, that word is not even really beneficial for us. You know, that were being subsidized, we provide a lot to the hospital and I felt the better situation would be in a financial partnership type of model, where the hospital did well, we did well and vice versa, and that had a lot of benefits. And we worked out something that I'll describe to you shortly, that I think helped us generate a true partnership. So, some of the challenges we faced in setting up this kind of practice was that The University of Texas and the hospital, a different hospital, different financial entities. So some physician groups or schools owned the hospital. And so the revenue can be shared or split as ac bit but in this case, that was not the case. So we needed to partner with a hospital, but obviously be in compliance with all the laws regulating it. There were also some existing private neurosurgeons and neurologists in some of these hospitals, not at our main medical center, how do we partner with them or not? And how do we have a program that works in these other locations? And finally, if this is going to be sustainable in the long run, how is this good for us, the hospital and the medical school, which are our partners? So this was our solution that we came up with. The first aspect of this is that we created an autonomous group that is run by us, the surgeons as a partnership. And now the physicians, which includes neuro-oncologist, intensive care doctors and increasingly more neurologist. We are the department of neurosurgery for UT, and we do have all the benefits and resources of that, and we contribute a reasonable amount to the school and the dean that we negotiated, but financially we are autonomous. We bill through the hospitals tax payer ID, we have... we are sort of an independent subsidiary, but because we have one financial entity with the hospital, we can be in partnership with a hospital, financial partnership. We also started work on a system wide committee that brought in all neurosurgeons that were practicing to be a part of our program, if they so wished. And then we started a very strong quality and cost savings program, early on. So this was our strategy, that we were going to partner with existing doctors who are good and wanted to work with us, that we had a very good financial structure that was going to work with us. And we were going to try to provide high quality, high value care as a group. So per us, and me as a chair, you know, partnership means many things. You know, we take risks with the hospital. So if one group doesn't do well, we're not going to get the extra revenues. If the hospital does really well or we perform well, then you don't have to ask for a subsidiary, is not enough in as a subsidiary, we are financial partners with the hospital. It's mixed incentives for us as physicians and the hospital administrators truly align, makes us work better as a team. There's less contention and argument and negotiation over who gets what, and we have very strong administrators that collaborate with us and work for us. But we, as a group of doctors do not report to the hospital or let me rephrase that. We certainly provide lots of reports because we're a part of the hospital, but we do feel that we run ourselves autonomously. And this has been a very productive, good relationship for us. So this has allowed for a very rapid expansion of our program. We have brought in 50 faculty members in five years, this included a lot of neurosurgeons, but also included neuro-intensivist, PhD's, neuro-oncologists. And now we're starting up program that I'll discuss a little later about bringing in good neurologists into the city financially into our system. There's been a lot of investment from the hospital as our service volume has grown. We built that a new 34 bed neuro-ICU, we're consuming now 128 beds in our main hospital for a neuro-science unit. And then we have programs at several other hospitals, as you can see, we've also gotten lots of new equipment and new programs. And I think it's been a successful five years. One of the very important things that we were able to do early, that allowed for this rapid expansion and for us to recruit a lot of the doctors we did was getting a good education program started, from really no residents and having one or two medical students per year doing the surgery right there, we had a program as one idea of program approved a few months after starting here, and then that was increased to two a year. And then we got a ten year accreditation aren't there days when the program director and has done an outstanding job, he really is a wonderful surgical educator and building our program. We also convinced the school to have a lot of our medical students rotate through Neurosurgery now, and currently more than 60 third year students every year spends two or three weeks on our service. And we've had many more students taking an elective as a fourth year. So I feel that the education program is a very, very important part of our whole program. And these are our residents. All of these residents started by matching with us and we decided early to build in our spots from below. And now in one year, the next match we'll get to full complement. And we do have a resident in each of our TGY slots. So concomitant with all the new faculty and building on volume has certainly kept pace. And you can see the major volume growth that occurred in our program. This is data from the Texas Hospital Association. This is not our data. This is inpatient market share for a cranial neurosurgery and on neurosurgery in total. And we are at about 29% of the Houston market. And we are by far the market leaders, our cranial neurosurgery is at 38%. And our spine is at 21%, where the market leaders respond to, but from a smaller margin than with our cranial program. Most of this growth has been in elective cases. And as that program volume has increased, our hospital income has increased significantly as well. And one of the things that still helps us quite a bit as a specialty is that neurosurgery is a high end program, and it is something that is supported with higher margins, we are very pleased and proud that our residents get the full panoply of neurosurgical cases in our program, from lots of peripheral nerve surgery, to DBS, to carotid endarterectomies and endovascular, all taught to them by neurosurgeons at our main hospital. And our research program has more than tripled, and our direct annual spend now is about 4 to 5 million a year. This is an interesting survey. This is a survey of just general consumers done by a marketing firm, calling somebody at home, not specifically patients, and saying if you had a brain related disease which hospital or system would you want to go to? And we increased the percentage of patients picking us to one in five in the City of Houston. At the same time, we've had a significant reduction in a lot of our quality metrics. We focused on this early. We have monthly meetings where each surgeon's quality data is presented in an identified format. And we look at lots of things. And over five years, our observed expected mortality has dropped quite a bit as an overall program. In the last quarter, we were down to 0.57, something like that. And at the same time, and this is just more examples of our mortality data. Our length of stay has decreased quite a bit. Our infection rates have decreased. There's a whole host of things that we're looking at and managing our service through data that is taken from the hospital's records, not our self reported data, the same data that goes to CMS and the University Health Consortium has become a part of our practice. And as a result, when we started as a program, we lost money on Medicare patients, which is quite common. As you know, the hospital model is often to make money on the managed care companies. And that offsets the losses on Medicare, Medicaid, and non-resource patients. We are now profitable in our Medicare patient population. In fact, we're the only service line in the hospital system to have that at this point. This is just an example of some of the cost savings that we've had. And we also have a whole separate program of spinal implants savings coupled with quality data that we've gotten our private neuro surgeons involved in and set up a partnership and co-management type of arrangements with a focus on their quality, and this has helped us to solidify our relationships with the light surgeons. So in the past five years, I would say in summary that we have negotiated a very good relationship with the hospital and the school. I think that if we were to talk to all of the people that are involved with us and in those institutions, they would feel that this was a win-win-win situation, which I think is really important. This resulted in significant growth in our program and volume, and of course the more volume, the more expertise you get, the more you can train people, better research you can do. And as we go forward talking about the future volume, well... I believe we made it quite important, no matter what kind of model we go to, this high quality of care will be important. And we have now extended our reach to all areas of Houston. And if we are going to, at some point compete for contracts, large contracts, to be able to provide care in multiple locations, because Houston is a big city, it's going to be very important. We are starting to add neurologists as financial partners to us that we can have a global neuroscience program. I'm going to explain more why I think that's important. I think it goes just beyond the referral potential and we were able to significantly enhance our research and educational goals. So what about the future? I think... as I just mentioned the volume of quality and cost, will remain key, we as always should focus on our patients, but there are going to be many changes. And I think if you talk to others or you probably feel yourself, the changes are coming fast and furiously. So, here are the questions that I think all of us should think about. Where are patients going to come from? Where do they come from now? and how is that going to change going forward? How is your pay gonna be determined? Or what is your revenue base going to be? Who's going to be contracting with you? Or who's gonna do the contracting for you? And then what kind of programs do you have in place now to measure your quantity? and how do you generate that data? and how does that get recorded? So here are what I think are going to be several likely trends, I think first... and I'm fairly sure this is going to happen in an increasingly accelerating manner. Healthcare is going to be organized into a few large groups. There are regions of the country where this is probably already the reality. In Houston,. it's not, and it's... I think going to head in that direction, I think what's going to drive there is that CMS, out of insurers, direct employers are not gonna want to deal with large numbers of small groups, as they think about purchasing health care, by paying a certain amount per year, which is what we're seeing more and more, by employers wanting to do in Houston. When that starts to happen in standalone hospitals, small facilities, small practices may have trouble accessing those patients. I don't know if the out of network kind of model will still be viable option, but I do think that once the shift happens, and the pearls start to become internal, this is something for smaller groups to think about. I also think that the payment per episode of care is probably going to start diminishing. And one of the things we're seeing with that is the penalties from CMS, for readmission, they don't want to do another DRG, even 30 days. Certain complications that occur, it's not going to be paid for. These are transdriven by CMS, but other insurance companies are following suit. And what we are likely to see is a desire on the part of the provider to shift the risk of cost to the physicians and hospitals. Now this is also an opportunity and that if you can provide a care at a lower cost, that is going to be a good financial situation to be in, a lower cost and high quality. I also think that what generates a profit or how the dollars flow in each organization or institution is going to change significantly. I don't think there's going to be one model for this or one national solution. I think this is going to happen at each location and maybe each institution separately. I think who determines that and how that looks is going to be critical. And finally, in the long run, I think we as neurosurgeons and as a specialty, have to start showing longterm outcomes and not just quality data from the hospitalization. You know, our national organizations are already involved in this with the NeuroPoint Alliance that will become part of, I think we need to all think along those lines. So things for us to keep in mind, you know, I enjoy my practice tremendously. I think it's an honor and privilege to treat my patients and that will not change. If we can continue to enjoy our practices in any environment that comes, the total healthcare spending does not have to decrease anytime soon. In fact, if we could just moderate the increases think that could... you know, I think a lot of people will be happy with that, even if it was just at the rate of inflation. And there are a lot of resources that are in our system. So I think increasing efficiency and how those dollars are allocated will be key, but I don't think there's going to be some sort of draconian cut. And I think this gives us a lot of opportunity. At the end of the day, only we can provide neurosurgical care and that gives us a very strong position and as much as possible, every healthcare entity will need a neurosurgery program, particularly if they have a level one trauma center or even two, high acuity care like cerebrovascular disease. And... for us... For them to have us in the group, gives them a significant competitive advantage, when you're trying to attract patients and negotiate contracts. And I'll give you some examples of that. So where will your patients come from? I think position choice will likely diminish. And I do... I feel personally that finding the right large partners or group of doctors that you can work with is going to be very important. What will help you? Now, if you're on a monopoly neurologist, you're the only one neurosurgeon in an area or your group that obviously puts you in a very strong position. But having or being a part of a hospital system that has unique capabilities that can't be provided. Once you become partners with a hospital, you know, you're dependent on them often for their vision, their managerial expertise, and the more breadth of services you provide and the quality, all these factors will give your group or your system the leverage. So how will you generate revenues? Under the affordable care act, unlike before, physicians and hospitals can share in overall revenues. So that's a big change and that's very similar to what we're doing now in our program. Physician revenues can gain additional income by beating CMS benchmarks. And for now, really, the thought of that is for primary care groups. It's only for Medicare patients, and this is a problematic approach because if benchmarks can change. If it's incremental what happens every year you might do well the first year or two, but are you going to be able to keep showing an incremental change? and how would neuro surgery participate? These are all questions, but... the import of this thinking goes much beyond Medicare changes and they will serve as a model for managed care to changes. And I think that if we start going down the road and even if the details are different, which I think it will be, the idea of a group of doctors or a healthcare system, which includes doctors and hospitals being responsible for the health of a certain number of patients for the whole year and being limited to a certain amount of spending, it's very likely to happen. And I can tell you, there are contracts like that already in Houston from a managed care companies or from direct employers. This will significantly restructure how care is delivered, focus starts to shift to total spending, efficiency of care, and there is both risks and significant opportunity. So I'm going to talk more about how I think we can adapt to that environment going forward. So, who will do your contracting? I think, if you're a one or two or three surgeon practice, you're going to have a very hard time getting any kind of contracts you may want, around here the negotiations often go like this. Here is your contract, take it or leave it, at a small groups. And many of you might be experiencing that already. I also think that aside from what you're providing, being able to show quality data in what you're doing is going to be increasingly important over time. So what about employment? It could be an easy solution. You don't have to worry about it a lot, but there are significant questions. How do you maintain your influence? You know, How much autonomy do you have? And these are questions that you can see on my spots. I can tell you that in Houston, many other doctors that have taken this type of employment contract did well early, the first contracts are generally pretty good to get them to join. They then gave up their practices. They lost their office staff, their manager, everything that they had done for a long time. And then often their second contract was not as good. Their contract may be worse, and so these are all things that we need to be wary of. And then at that point to think of restarting your practice can be quite daunting. So what are some of the things that we're thinking about here and what are we doing in our program? First, I think an advantage for us is that we have a very sustainable and good partner hospital. And for us, that is our partner. We're not going to consider other partners. We feel like this is working. We feel like it's a strong system and that they are moving forward and thinking innovatively about the future and that we will do well together. We have also become the largest neurosurgery group in Houston, by a long shot, and so, if you're Blue Cross or Aetna, it's going to be hard for them to get all of their patients treated today without somebody in our group being involved. And I think a very important advantage for us going forward is the amount of higher acuity in neurosurgery that we provide to the city. If you're a Blue Cross, Blue Shield, two out of your three patients that have an emergent neurosurgical problem, exabyte with hemorrhage, or a subdural hematoma is treated by our group. And that hopefully will make us an indispensable provider of care, I think will help us. We also have very good geographic distribution. We can provide a full spectrum of neuroscience care and we've started on long-term outcomes project. I also think that the addition of neurologist are gonna be very important, and I'm gonna to explain why in a second, with Memorial Hermann... Memorial Herman was one of the first groups here to set up an ACO, was approved by CMS. I am serving on the board of that. And I can tell you, we had a lot of meetings, things are moving forward. Nobody knows today exactly what an ACO should look like and how things are gonna be. Even the secretary of health and human services doesn't know this is being made up on the fly. And the earlier you get involved, and the more you are involved, I think it's going to be important. We wanted to include neurology because we want it to be able to make the case that we are the primary care providers on neuroscience. Unlike some other diseases, lets say heart disease or renal disease, where the primary care doctor manages a lot of it already, when it comes to conditions of the brain, many primary care physicians are uncomfortable with it, they're not going to modulate Parkinson's drugs or treat children with epilepsy. The other point we can make is if somebody comes in with a subretinal hemorrhage or has a brain tumor, only we as neuroscience providers can take care of those patients. I think, if we think in that way, then I think one approach that we can take is let's say, you know... The city of Houston which spends almost $315 million a year on their neuroscience, on your healthcare for their employees, what percentage of that today is being expended on neuroscience care? Let's say it's 12%. I don't know, I'm making that number up. That translates into a certain number of dollars. If we, as a group of physicians in the hospital say, we're going to take care of all the neuroscience needs and that's our budget. Then we have a dollar figure and an amount and something you can target. Then we figure out how many hospitalizations occur, what the cost of that, what each type of position should receive, and then that allows us to craft an approach that is very different than just a traditional paper service or an alternative outcome, that would not be good for us. If somebody else controlled all that or went to a primary care team. And we were a cost center, at the end that they have to pay us a certain amount for the service but we're not really in there, upfront determining the system or the flow of revenues or where the resources should go. And I submit to you that would not be a good situation for us. So I think each city and region will have a different system and approach. You have to know the particulars in your own environment, but you have to get ahead of the curve. And I think it's very, very important to be a leader in this and get involved because if we're not at the table and we're not presenting ourselves, nobody is going to do that for us, and do it well. Finally, I think for starters, this kind of approach takes away the problems with an incremental bonus type situation. We don't need to keep incrementally reducing costs. We have to find ways to provide better and better care or good care for the same cost. And that's an annual recurring type of budget. So, I don't know if that's what we can do here. We're working towards something like that. But I think that might be a good solution. If you're a new graduate looking at jobs, I wanted to just... you know, maybe give you a few thoughts. I think first of all, you know, some things never changed. The most important thing to look for are the types of partners you're gonna have, what kind of people they are, the kind of doctors they are, the types of patients and practice you'll be in, Where is your family going to live, structure of their group, these things are all first and foremost. But today I think there are other questions you can ask and good questions like, what is gonna be the comparative advantage of this group? If local health care, what do we organize? Why would this group be the indispensable group? Why would this group get the best practice or the best contracts? What kind of large institutional partner does this group have? And, you know... Is the hospital a one hospital city with multiple doctor groups, or is it vice versa? You know, there's all kinds of different situations. And there are gonna be some situations with inherent advantages going into this new world that other groups don't have. You know, how dependent is the practice on ancillary revenues? Many practices already are, is that sustainable? What kind of model is that going to be? I would look at what kind of EMR systems are on and if they're not... if they're falling behind on those kinds of regulatory requirements. It's going to have a consequence from not only CMS, but other providers. I can tell you the insurers in Houston increasingly want to see your data, is that their own data, that they want quality data emanating from the hospital. And how much of that is your group doing now, I think will be important. And really how forward thinking are your partners? And are they thinking about how are they preparing for the future? So in conclusion, I think for us to maintain the health of our patients in our specialty, we must adapt to the changes that are coming and neurosurgery has always changed quite dramatically, and for the better, and even in my short career, I've seen dramatic changes. I don't think I'm exaggerating to say that the structure of healthcare delivery itself is going to dramatically change going forward. We must develop the right relationships, whether it's with an insurer, with a hospital, with some sort of entity, that I think can take us into the future while maintaining as much autonomy for ourselves as possible. Think one of the most important things that we're developing in our group is a sense that we stand together. And when we have more and more physicians providing top quality care, it can move all in one direction. That's a very powerful situation and something that will be very good for us. I think it's pretty clear increasingly that both the government and large groups and insurers are not gonna want to do a deal with multitudes of small groups and providers. I think that will be important and we must become actively involved in the administration of our programs. And this is not something any of us went into medicine for, and maybe not something that we look forward to, but I think it's a critical part of our practice. So thank you for your attention and thank you for this opportunity.

- Thanks so much. This really was a very spectacular call. Could I talk a very applicable but practical really shows the different phases of challenges that we're going to be managing in the future. So I really want to thank you again for your time. Thank you for your personal perspective, really admire your success and excellence in such a competitive environment in Houston. And we sure hope to have you join us for another talk in the near future. Thank you again.

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