116 3rd St SE
Cedar Rapids, Iowa 52401
IOWA CITY — The University of Iowa Hospitals and Clinics is deliberating whether to partner with a larger regional system, and it's paying a consultant more than $150,000 to model financial scenarios for each option.
Dixon Hughes Goodman, which offers health care advisory services from its Atlanta office, is assessing a downside, upside and middle case for each scenario — to partner or to remain as the state's only academic medial center.
UIHC spokesman Tom Moore declined to elaborate on what regional collaboration or partnership could look like for UI Health Care. Nor has a specific partner been cited.
'It is incumbent on every hospital and health system in the country to evaluate new opportunities to improve care and reduce cost,' Moore said. 'We have no definitive plans to share at this time. (UIHC) is committed to exploring any way we can further improve care for Iowans.'
UnityPoint Health in Cedar Rapids announced a partnership with the Mayo Clinic of Rochester, Minn., in 2014. That made it part of Mayo's care network, an international group of 27 other organizations that can receive consultations on complex case.
The UIHC review comes at a time of tremendous change across the state and national health care landscape, with economic forces and environmental conditions shifting as to how care is provided, how providers are paid for services and how patients and consumers interact with the health system.
UI Health Care, specifically, is undergoing seismic shifts. Jean Robillard — longtime vice president for medical affairs and dean of the UI Carver College of Medicine — plans to retire. Possible changes to Iowa's Medicaid expansion could affect hundreds of thousands.
And Iowans are getting older — with the percent over age 65 expected to grow from 15 percent in 2010 to more than 21 percent in 2030, according to a UI Health Care presentation planned for next week's Board of Regents meeting.
In documents provided to regents in advance of that presentation, the hospital refers to itself as a 'price taker,' meaning others set the costs of its services. And because 84 percent of UIHC revenue comes from three payers — Medicare and Medicaid make up 55 percent and Wellmark accounts for 29 percent — changes in what those entities cover has a significant impact on the bottom line.
UIHC executives in recent months reported a sharp increase in denials from Medicaid managed care payers. And according to the upcoming UIHC presentation, 'value-based payment systems are coming.'
The term of the university's contract with Dixon spans June 12 to Dec. 31, although the agreement charges the firm to prepare within a four-week time frame seven-year projected balance sheets, income statements, and cash flow statements for the two potential scenarios.
Despite the turnaround mandate, the consultant's work is ongoing, according to UIHC spokesman Moore said.
According to UIHC's charge to Dixon Hughes Goodman, the firm's analysis of UIHC's future structure will consider several assumptions — such as continuation of current reimbursement practices and expectations, anticipated changes in volumes and payment rates for both government and commercial payers, and shifts as 'value-based payment changes currently underway accelerate in the market.'
Such changes, according to Zall, are driving increased collaboration among academic medical centers — which describe medical schools that are affiliated with hospitals and have a threefold mission — education, research and patient care.
Academic medical centers 'have tended to be less focused on, how do we deliver a cost-effective procedure or deliver it at a competitive price,' Zall said. 'Many academic medical centers have higher costs.'
The UIHC, in its presentation for the Board of Regents, spells out as much.
'UI Health Care must lower its cost structure due to the declining payer reimbursements, the need for transparency and increased consumerism,' according to the presentation.
With consumerism growing in the health care market — as patients shop for quality and price — academic medical centers across the country are joining forces in hopes of becoming more cost-effective while maintaining their teaching, research and specialty-care missions, Zall said.
'It's a burgeoning area of activity,' he said. 'They are soliciting ideas on, how do we survive in this new environment.'
The shift from volume-based care models — those involving payment for service — to ones involving payment for value encourage competition, according to Richard J. Zall, partner at the New York City-based law firm Proskauer Rose and chairman of the firm's health care law practice.
'Government or commercial payers are really looking for much more value in the payments that they make,' Zall told The Gazette. 'It used to be that if you did a procedure and it was medically necessary and the charge was X, you would be paid that much.'
Now, he said, with costs escalating, payers are moving to value-based systems and saying, 'We'll pay for good outcomes and achievements, not just because you did the visit.'
A variety of partnerships
Other major academic medical centers across the country include the University of California system, Universities of Michigan, University of Nebraska Medical Center, Johns Hopkins University and Emory University.
Collaboration might involve partnering in patient care — sharing expertise and specialists, expanding offerings and swapping clinical protocols that have proved successful, for example. It also could translate to cooperation in clinical research if, for example, one hospital has an appropriate patient for its partner's trial, Zall said.
'Health care for decades operated in silos,' he said, arguing that has inhibited advancement. 'Part of what the new dynamics and payment pressures and value-based payment initiatives are trying to do is have more coordination and clinical integration.'
Partnership among academic medical centers also could benefit hospital reputations — depending on specialty and prestige. The University of Iowa, for example, is ranked among the elite in five specialties, according to U.S. News & World Report. But its standing has slipped since 2014, when it ranked in nine specialties.
And some academic medical centers, as they shape-shift in response to a morphing market, are partnering not with others like them but with non-academic health care systems — such as community hospitals and clinics — according to Igor Belokrinitsky, a principal with PwC's strategy consulting arm.
The thinking, he said, is 'if I join with a non-academic center, it will allow me to spread my costs across different types of facilities so that, for certain patients who don't have very complex needs, I can provide care at lower price point in a less-complex facility. But I can still provide very complex care and still do my teaching and research.'
In the end, a variety of partnerships might be best, according to Belokrinitsky.
'They may need community partners to have a better network, they may need academic partners to spread their cots and investments, and they may need technology partners and industry partners to develop new treatments as well,' he said.
'A precious resource'
Not every collaboration will be successful.
'You have a lot of different priorities that have to be balanced, so it's not necessarily easy to make them work,' Belokrinitsky said. 'But if you can get past those complexities and structure them in the right way and have the right governance and the right board, and if you can set the right set of objections, …
it can be quite powerful.'
When asked to confirm the university's interest in collaborating with a larger regional system, UIHC spokesman Moore referred to a new UIHC strategic plan, which includes among its primary goals 'strong partnerships' both in Iowa and beyond that will 'drive growth and dollars and increase scale.'
That plan also looks to grow the UIHC brand and 'build more (and broader) relationships with industry and the private sector to develop and implement innovative research initiatives.'
In a broad sense, Zall said, more collaboration could force advancement on many fronts.
'It's disruptive, but probably will lead to a more efficient system,' he said. 'That is the hope.'
Not all academic medical centers will survive the massive changes, analysts say. But, according to Zall, they play an important role and should be sustained.
'That's where much of our medical advancement occurs,' he said. 'They're a precious resource, I think.'
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