The Annual J.P. Morgan Healthcare Conference kicked off Monday in San Francisco. Finance reporter Tara Bannow will provide updates and daily observations here throughout the conference. You can also find additional stories on ModernHealthcare.com or Twitter.
Advocate Aurora’s lofty goal: Double revenue by 2025
Advocate Aurora Health has set a number of ambitious goals to hit by 2025, including more than doubling its revenue, which currently stands around $ 12 billion.
The not-for-profit system’s CEO, Jim Skogsbergh, announced to an audience at the J.P. Morgan conference Monday morning its Transformation 2025 initiative, which includes growing revenue to $ 27 billion and serving 10 million patients.
Advocate Aurora, with headquarters in Downers Grove, Ill., and Milwaukee, also strives to grow its operating margin to 4.7%—it was 4.6% in the third quarter of fiscal 2019—and cut costs by $ 1.1 billion in that time.
The system will rely in part on a strong drive to become more consumer-focused, he said.
“That requires a herculean effort, pivoting to where the industry is going and making sure that we get really, really intimate with the consumer in ways that we haven’t in healthcare before,” he said. “We admire so many organizations that are doing that.”
Among other 2025 goals: to serve 10 million people and derive 10% of revenue from new businesses that have a consumer focus, Skogsbergh said.
He closed by refuting recent research that challenged the assertion that health system mergers improve outcomes.
“Ours have,” he said. “They’re demonstrable and measurable. So we believe in it.”
Baylor Scott & White wants $ 1 billion in cost savings over five years
Baylor Scott & White Health is plowing ahead with a second aggressive cost savings target since its 2013 formation.
The Dallas-based health system is working toward a new goal of $ 1 billion in cost savings over five years, Chief Financial Officer Penny Cermak said. The system has arrived at $ 200 million in annual improvements to its cost structure in the second year of a new savings program, she said.
“If we want to make the cost of healthcare more affordable for our patients, the only way to get there is to first be lean and efficient ourselves so we can pass along savings to our customers and our members,” Cermak said.
Following the merger that formed Baylor Scott & White, the system achieved its goal of $ 1.5 billion in merger-related savings over five years, Cermak said.
“We did that and then some,” she said.
After that, the cost savings slowed to a crawl. That’s when, two years ago, the system launched a new program called REACH, which stands for realizing efficiencies through achieving cost effective healthcare.
Bon Secours Mercy Health touts merger savings
Bon Secours Mercy Health locked in $ 160 million in merger-related savings in 2019, significant progress toward its overall savings goal.
The not-for-profit health system, formed through the September 2018 merger between Mercy Health and Bon Secours, identified $ 280 million in merger-related synergies, CEO John Starcher said on Monday morning.
On July 1, 2019, the 51-hospital system became the largest private provider in Ireland with the purchase of five hospitals with roughly $ 320 million in annual revenue.
“We’re excited about this,” Starcher said.
Cincinnati-based Bon Secours Mercy’s EBITDA margin is projected to have fallen to 9.2% in 2019 from 10% in 2018 on a pro forma basis. Its operating margin shrunk from 3.4% in to 3% in that time. Meanwhile, the system’s initial 2019 forecast shows $ 8.7 billion in revenue last year, up from $ 8.1 billion in 2018 on a pro forma basis.
On the bright side, Bon Secours Mercy CFO Deborah Bloomfield said employment expenses fell 2% year-over-year as a percentage of revenue. Admissions grew 6% in that time, and days cash on hand improved from 183 to 253 on a pro forma basis. The system’s debt to capitalization improved from 41% to 31% year-over-year.
Lowering patients’ costs takes $ 100 million from Intermountain’s margin
Intermountain Healthcare has been vocal about its effort to lower its patients’ out-of-pocket costs—at the expense of the health system itself.
Salt Lake City-based Intermountain’s efforts to bring down costs for patients and members of its health plan have shaved $ 100 million off its margin in the past two years, Bert Zimmerli, the system’s CFO, told a packed audience during the conference’s kickoff session Monday.
Nonetheless, Zimmerli said it’s “absolutely” the right thing to do.
“You hear all the time at this conference: Healthcare is becoming unaffordable,” he said. “I don’t agree with that. It’s already unaffordable.”
To compensate, Intermountain has had to double down on its efficiency efforts, Zimmerli said.
One example of cost savings is bringing the cost of a normal, vaginal delivery with a plan available for uninsured patients that reduced the cost from approximately $ 6,000 to $ 4,150.
Intermountain has created a platform of 60 such shoppable procedures, Zimmerli said.
“We make a lot of money on those,” he said.
The system’s finances remain strong, however. Intermountain has 367 days cash on hand, Zimmerli said, attributing the metric to strong collections under its revenue-cycle vendor, Chicago-based R1 RCM.
Northwell to implement “self-service” price estimator
Hospitals that don’t offer patients financial estimates ahead of scheduled visits are falling behind in an area that’s now dominating the industry: consumerism.
Not-for-profit Northwell Health has offered a price estimator for a while, but it relies on employees calling the patients’ health insurance company, which takes up a lot of time. By the end of the year, Northwell plans to implement a major upgrade. Patients will be able to get price estimates on their own through the health system’s website.
“We have to be able to give our consumers a better out-of-pocket cost estimate,” Rich Miller, Northwell’s chief business strategy officer, told Modern Healthcare in San Francisco on Sunday ahead of the J.P. Morgan conference. “To the degree technology can make that easier and more accurate, we feel it’s the right thing to do for consumers.”
New Hyde Park, N.Y.-based Northwell is working with credit-reporting company Experian to implement technology that will electronically submit the relevant information to a patient’s insurer and determine their out-of-pocket costs for certain procedures automatically.
Currently, that’s a manual process that “takes quite a bit of time,” he said. It’s also rudimentary and creates estimates using prior patients with the same insurance and procedure, he said. As time went on, Miller said the health system realized it had to improve its offerings.
The new price estimator tool will be up and running for Northwell’s medical group in April and for its hospitals in July. The self-service website function will be ready by year-end, Miller said.
While hospitals are happy to share individual patients’ price estimates, they vigorously protested a CMS rule that would require hospitals to publish payer-negotiated prices for various services. The rule is set to go into effect on Jan. 1, 2021.