THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Sunday, March 5, 1995 TAG: 9503040349
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DEBRA GORDON, STAFF WRITER
LENGTH: Long : 178 lines
It was a summer day in 1986, and chief flight paramedic Robert I. Bonar Jr. was transporting two critically injured teenagers from Dothan, Ala., back to West Virginia University Hospital in the hospital's air ambulance.
Suddenly, a summer storm hit. Ice formed on the wings, and the plane began dropping. Bonar threw his body over the injured kids, hooked his feet under their cots and prepared to die.
Luckily, they landed safely. A few days later, his boss offered him a desk job, which Bonar accepted with a sigh of relief.
Now, as the new chief executive officer of Children's Health System, the parent company of Children's Hospital of The King's Daughters in Norfolk, Bonar, 43, finds himself back in a maelstrom. And, as in that plane nine years ago, kids' lives are at stake.
Last month, the Virginia General Assembly voted to require that all Hampton Roads Medicaid recipients join health maintenance organizations beginning Jan. 1. The bill is awaiting approval from Gov. George F. Allen.
The change means CHKD, which depends on Medicaid for more than half its revenue, must transform the way it has operated for 34 years.
Those changes are epitomized in the hospital system's new mission statement. By adding three words, ``cost-effective service,'' CHS has launched itself into the managed-care arena.
It was not a change made lightly, says CHS board chairman A.C. ``Gus'' Miller, who is also president of Miller Oil Co.
``A business approach is coming to the health industry,'' Miller said.
Last month, Bonar eliminated the hospital's chief operating officer position, putting Barbara Biehner, who had held the position for three years and supervised construction of the system's new, $72 million hospital, out of a job.
A vice president's position in the finance department disappeared through attrition. And over the next three years, as managed care increases, Bonar hopes to cut another 30 percent of controllable expenses, now at $83 million.
Eliminating Biehner's job was painful, Bonar admits. ``But if we don't get senior management trimmed, we'll have no credibility with employees when we ask them to do more with less.''
It's a move other children's hospitals around the country are making.
``The marketplace is going to force hospitals to get leaner in terms of being price-competitive,'' said Lawrence A. McAndrews, president of the National Association of Children's Hospitals and Related Institutions.
That's what it's all about in this brave new world of managed care, where price matters as much as quality.
With managed care come new reimbursement mechanisms, like capitation, in which a provider is paid a fixed amount each month regardless of what services it provides. Or global pricing, in which hospitals are reimbursed per illness, regardless of how long a child remains hospitalized.
``We have to embrace a new method of doing business,'' Bonar said.
Step One is contracting with health insurers, and even directly with employers, to increase the number of children for whom CHS can provide services.
That's necessary, Bonar says, because capitation works best with higher volume.
A system that accepts lots of relatively healthy kids - who don't require many services - then has the funds to pay for the $1 million premature baby who requires massive amounts of care.
But to increase volume, CHS has to bring down its costs, which today make it the most expensive hospital in the region, although the 173-bed facility ranked 21 percent below the national average for children's hospitals in 1991.
``We're trying to price ourselves so that pediatrics doesn't have to cost any more than any other local hospitals,'' chief financial officer Richard D. Knox Jr. said.
And that's difficult, because pediatric care does cost more. Thirty percent of the care in children's hospitals is tertiary, meaning it's provided to the sickest patients. That's more than twice as much as the 12 percent in general community hospitals, according to NACHRI. For CHKD, that number jumps to 54 percent.
Additionally, higher nurse-patient ratios are required because very young patients can't speak for themselves, and so need more attention.
And children's hospitals often need more technology because they must be outfitted for every age, from the tiny premature infant to a nearly adult 16-year-old.
But as managed care decreases the number of patients entering the hospital - as well as the time spent there - costs must come down, Bonar says. It's a difficult message to convey to his employees, he says, especially in these days of 90 percent to 100 percent occupancy rates.
``People think you're schizophrenic when you say you need to downsize and get ready for fewer beds,'' he said.
But over the next 18 months, he said, every program CHS operates will be subject to a cost-benefit analysis.
``If we find programs that are not unique to King's Daughters, that are not important to physicians, that have no role in teaching new doctors and no research benefits, then we have to ask why we're doing them.''
Board chairman Miller explains the urgency this way: ``I don't ever want to hear that some hospital in Washington, D.C., can treat our children better and cheaper. We're going to keep the quality of care up, and it's going to be done at the best possible cost, and no one is going to beat us.''
Knox worries about just how far the hospital can cut staff and services without affecting quality. A change must also come, he says, in how health care is practiced. ``You've got to look at health care in a different light,'' he said, ``and figure out how to do it better, how to retool yourself and take out steps.''
To help physicians do that, the hospital is building a $9 million clinical information system. When it is completed in three years, it will link physician offices with the hospital and provide computerized medical records and a data base to show doctors how the way they practice affects costs as well as clinical outcomes.
In conjunction with its doctors, the health system plans to provide physicians with specific steps of care for particular illnesses.
For with managed care comes increased pressure on primary-care pediatricians.
They ``share a lot of the responsibility with us in terms of determining the costs of care,'' Bonar said. And they can't determine the costs without accurate and timely information.
Overall, the system has always had a close relationship with its physicians, says pediatrician Robert Fink, past president of the hospital's medical staff.
``It's been a very strong, open relationship,'' Fink said, ``a relationship where there is mutual trust.''
The physician-hospital relationship deepened last year with the creation of a for-profit, physician hospital organization, the Network for Child and Adolescent Health. The PHO operates as a subsidiary of CHS, contracting with insurers on behalf of physicians and the hospital.
The system is linked with physicians in another way, by shifting its focus from illness to wellness.
``It is a dangerous strategy to make tertiary care our only strategy,'' Bonar says. ``Because to say we're only going to take care of extremely ill or critically ill children builds on the old illness model, not the preventive model.''
He envisions partnerships with other health care providers in Hampton Roads to develop pregnancy prevention programs, address teen violence and educate parents in treating their kids' chronic illnesses.
But the hospital will need to do more than that to succeed under managed care, says NACHRI's McAndrews. ``The idea of prevention and wellness is a good idea, but it's oversold. It's not going to wring out the cost that people expect it to. . . It would be nice to eliminate low-birthweight babies, but there's no evidence that prevention is able to significantly do that.''
Bonar agrees - to a point: ``We still need to pursue it, and part of it needs to be driven by buyers of health care.''
And so he will be forging a closer relationship with the system's payers, so that as high-cost areas are identified, CHS can make decisions and implement programs to address them.
``We need to ask what they expect of us; how can we help serve kids for good or better outcomes and make you feel you have a better value for the dollar,'' Bonar says.
The hospital's largest payer, the state Medicaid system, is already pretty pleased with its approach.
The hospital, says Tom McGraw, director of alternative health care at the Department for Medical Assistance Services, ``has a real positive approach about coordinating care to make sure the best care is provided at the lowest possible price.''
When the state implemented its own managed-care program, called Medallion, he noted, CHS dove in. It opened an off-site clinic to treat nonemergencies, significantly reducing emergency-room visits.
``They look at health care more globally than some other hospitals,'' McGraw said, ``taking into account primary care and preventive education, which is certainly what the HMOs like.'' ILLUSTRATION: Graphic
ROBERT D. VOROS/Staff
THE PAST...AND THE FUTURE
SOURCES: Children's Hospital of The King's Daughters; American
Hospital Association
[For complete graphic, please see microfilm]
Color photo
PAUL AIKEN/Staff
Bonar meets with Bethany Hanrahan and her son Michael.
Photo
PAUL AIKEN/Staff
Children's Hospital of The King's Daughters has always had a close
relationship with its physicians, says pediatrician Robert Fink,
past president of the hospital's medical starr.
by CNB