What are your projections for how the healthcare system in our country will evolve over the coming year or two and what impact will it have on businesses?

LEVINE: I think we’re going to see a continued consolidation of health care providers over time driven by price pressures on the health care system, which will motivate providers to search for alternative, more sustainable business models. So over time, I predict consumers will have to choose health benefit plans based on selecting integrated delivery systems more than they are today with narrower networks and higher deductible plans to keep them affordable. Over time, as hospital systems become larger, we may see the pendulum swing the other way and some may be able to command greater reimbursement based more on their market share dominance as opposed to quality patient centric care. This will lead to an unevenness in the cost of care based on geography. I’m not sure anyone knows the right answer and it will be interesting to see how this will play out. We will likely experience some instability while the health care delivery system discovers how to define and deliver affordable value-based care and society decides how much it prioritizes health care for its citizens.

At this stage in the game, what do hospitals and physicians need to do to offset the fact that reimbursements have been reduced?

VIVIANO: The critical reality is that health care costs have been increasing and will continue to do so. Part of our responsibility as an organization is to seek affordability for patient families (and businesses who provide their health insurance) without compromising our commitment to provide the highest quality care. Like most businesses, Children’s Hospital Los Angeles is constantly working to make sure we are managing expenses and making the most out of capital investments; as a high fixed-cost organization, the more we can do to increase volume and throughput, the better we can deal with revenue pressures. Over the last year, this has meant focusing on creating lasting value in all our settings – inpatient, outpatient, operating rooms, etc. One great example is the work we’ve done to streamline throughput in our Emergency Department, which has actually reduced the average cost per visit to our ED while improving the time it takes to be seen by a physician, time to be diagnosed and treated, and in certain circumstances, time to be admitted to an inpatient unit.

In your view, what is the current outlook for the “end users” – the patients?

LEVINE: I believe the patient experience will look very different over the next few years. On the positive side, there has been an increase of consumerism in health care and the system is starting to recognize the importance of patient input in the health care equation. As a result, access is more of a priority for providers, and we’re seeing a move to more effective outpatient care and retail partnerships. Similarly, large employers are opening their own onsite clinics to make it more convenient for employees to access health care. Additionally, the focus on wellness, preventive health and health maintenance programs has been very positive. However the negative side is for those with complex and serious health conditions; the formation of integrated medical groups and narrow network products are limiting the choice for these patients who want to go outside of their restrictive network. So, on the one hand, primary care for many is more accessible, convenient and effective, but on the other hand it can be more challenging for the patients that need more complex care.

VIVIANO: For me, it comes down to one thing: compassionate family-centered care. The connection between compassionate family-centered care and better health is clear—when patients and families partner with care providers, patients experience better outcomes and incur lower costs. Additionally, the rise of consumerism in health care means patients increasingly want to better understand their options and make smart health decisions based on factors like quality and cost. As such, taking care of the whole family’s experience, not just the patient’s, is more critical than ever, especially for health care organizations like Children’s Hospital Los Angeles who face the challenge of making sure family-centered care keeps pace with rapid growth. The fact that National Research Council (NRC) Health’s patient experience survey has recognized CHLA as the Top Performing Children’s Hospital for three straight years exemplifies to me our continuing mission to ensure children and their loved ones feel engaged with, not overwhelmed by, the transformative, compassionate care they receive with us.

What are license-exempt medical foundation clinics and how can they be helpful in contributing to increased alignment, quality and convenience of healthcare?

GOMEZ: License-exempt medical foundation clinics are an outgrowth, in part, of California’s prohibition on the corporate practice of medicine. California law and practice permits lay entities to own and operate medical clinics and offer comprehensive medical and other health services without a license, commonly known as license-exempt medical foundation clinics, provided that several legal requirements are met. These legal requirements include operation by a nonprofit, tax-exempt 501(c)(3) corporation, which must provide healthcare to patients through a group of at least 40 physicians representing at least 10 board-certified medical specialties, at least two thirds of whom must practice full-time at the clinic. The medical foundation clinic and its physicians must also engage in medical research and health educational activities. The license exempt medical foundation clinic model provides the closest model to direct employment by lay entities of physicians (apart from a few other recognized exceptions in California). Because of the typically close affiliation between hospitals, medical foundation clinics and participating physicians, there are often significant opportunities for both financial and clinical integration and alignment among them. Changes in many medical foundation clinic compensation structures that continue to involve a greater incentive and “at risk” component that is tied to meeting both productivity and quality metrics, as well as more targeted joint operating committee and other governance structures are also helping to facilitate greater alignment and quality. Medical foundation clinics may also lend themselves well to the expansion of telehealth services and relocation of certain health services to retail and other less traditional locations, further increasing access to care.

With the rise of telemedicine and electronic health records – how does technology affect the way your business innovates to meet the needs of patients?

VIVIANO: The rise of digital medicine is an exciting frontier for modern health care. Researchers and clinicians can now aggregate patient data electronically and analyze population health on a massive scale. Children’s Hospital Los Angeles is making major investments in electronic repositories that allow us to evaluate data from all corners of our health system, including our research enterprise. We’ve also hired our first chief innovation officer to drive clinical breakthroughs and new approaches. How does this meet the needs of patients? At the simplest level, electronic integration across our multiple locations in Los Angeles County means families are assured every clinic has the most up-to-date version of their child’s health record. Comprehensive data analyses can also drive operational and policy changes to improve patient outcomes and progress towards our goal of zero harm; at CHLA, such changes have resulted in reduced lengths of stay and lower pharmacy costs. Furthermore, one of the most remarkable aspects of “e health” is using software algorithms to discover otherwise unseen health patterns. For example, CHLA can analyze real-time lab results, vital signs and other clinical data to help identify patients most susceptible to sepsis. The opportunity to predict at-risk populations and even design new treatments at a genetic level is one reason we’ve committed about 40 percent of our capital budget to expanding our network infrastructure.

LEVINE: City of Hope is a National Cancer Institute-designated comprehensive cancer center so people come from long distances to get the high quality, specialized care we provide. As treatments improve and cancer becomes more of a chronic condition, more patients are returning to the normalcy of their pre-diagnosis lives and their experience with their oncology provider becomes more of a long-term relationship. Over the long term, convenience and access become an issue, which elevates the importance of telemedicine and being able to receive information electronically. As we think about the future model of cancer care, a truly patient centered approach isn’t just a patient-friendly approach that takes really good care of people while they’re undergoing active treatment. But rather designing a comprehensive care program that envisions the patients returning to their families and community, going back to their normal lives and minimizing unnecessary travel and the hassle of routine visits. Telemedicine and having electronic access to your own health information allows for quick, convenient and flexible care, and both are critical to a truly patient-centered care model.

Might concierge medicine be an alternative for physicians who wish to avoid today’s market pressures and reduced reimbursement?

GOMEZ: It may be a viable alternative for some physicians. Concierge medicine often involves patients paying an agreed upon amount per month, per quarter or per year directly to physicians often in return for an unlimited number of appointments, certain amounts of lab tests, certain medications, and follow up visits, among other things. Enhanced access to a physician via email, phone, or in person at the patient’s home is common. Some physicians have found this model attractive because the direct patient payment model frees them from time consuming insurance-related documentation and paperwork, permitting more time for greater interaction with each patient. This, in turn, may facilitate improved quality of care and greater career satisfaction for the physician. Notwithstanding the potential benefits, care must be taken not to run afoul of various legal requirements and prohibitions. For example, the provision of medical services by physicians based upon a monthly, quarterly or annual fee may, in some circumstances, constitute the business of insurance, potentially requiring approvals and appropriate licensure from state insurance or managed care regulatory agencies, the legal requirements for which appear to be in flux. Further, complicated rules govern the interaction of concierge physicians and patients who participate in Medicare.

Can non-physician providers help reduce costs and fill the gap with the insufficient number of primary care physicians?

LEVINE: Absolutely. For our patients, we believe a team is needed to meet treatment goals. There’s evidence and experience to support the belief that nursing professionals can provide much of the care that is delivered today and, for many purposes, can be more effective than the physician because of their focused training in patient-centered care. For example, a health educator or nutrition specialist will likely be more successful in helping a newly diagnosed diabetic understand how to modify diet and exercise to optimize his or her health. And when we are talking specifically about cancer treatment, there are a range of care needs that might affect treatment success that include anxiety, depression and isolation, as well as practical considerations such as transportation needs, nutritional support or child care. At City Hope we believe we should go beyond the clinical side of care and treat the whole person. That means having an integrated, interdisciplinary team that goes beyond physicians and nurses to include supportive care professionals like social workers, genetic counselors and, with increasing concerns related to the cost of cancer, financial advisors.

VIVIANO: We may have a different take than the rest of the health care industry since pediatrics in general does not have a shortage of primary care physicians. The bigger pressure we face is shortage of subspecialty pediatric experts. Implementing an effective, team-based approach is instrumental in allowing specialists to focus on the care only they can administer. To achieve the highest quality care possible, Children’s Hospital Los Angeles works to ensure providers at all levels are working in concert at the top of their license – from doctors and nurses practicing their specialties, to care coordinators in other roles maximizing their scope of work to provide team support. We also see power in primary care so we set up the CHLA Health Network to connect CHLA and our sub-specialists with great general pediatricians across Los Angeles County and beyond. Through this network, we expand our integrated delivery system by creating seamless connections among pediatricians, pediatric sub-specialists and CHLA. Together we can develop pathways to care for patients together and bring even more expertise into the primary care setting. Finally, a team-based care approach also means seeking out people specifically skilled in caring for kids, through some of the most productive residency and fellowship training programs for pediatricians and nurses in the U.S. CHLA has one of the largest general pediatric residency programs in the country with thousands of our graduates actively practicing primary pediatric care today.

What changes are occurring with respect to behavioral healthcare and why is it important?

GOMEZ: There are many changes on many fronts that are driving greater access to, and investment in, behavioral healthcare. This is important because healthcare providers, investors and the public appear to be realizing with increasing clarity, that success in treating underlying behavioral health issues generally translates to greater success in treating traditional physical health issues. For example, studies have shown that frequent users of hospital inpatient services also have a significantly increased rate of behavioral health diagnoses as compared with those who are not frequent users. Studies also show that the presence of depression or other behavioral health conditions often worsen one’s medical prognosis and often hinder adherence to treatment regimens. Changes in payment, including greater payment for telehealth, increasing coverage of behavioral health conditions and increasing the availability of in-network providers, and other technological advances are improving access to care, although much room for further progress remains. The fragmented state that much of the behavioral healthcare market is in is drawing infusion of capital, efficiencies and technology by health system partners and private equity investors into the sector in hopes of adding value to behavioral health providers and their patients, which is also significant. All of the foregoing are contributing to increased activity, interest and investment in expanding behavioral healthcare capabilities and access. While this is encouraging, there are several important legal considerations. These include, without limitation, corporate practice of medicine issues, licensing and certification, payor requirements and obligations, regulation of telehealth and mobile apps, unique privacy considerations, real estate zoning issues, scope of licensure issues for behavioral health professionals, compliance issues related to laboratories, patient brokering issues and more.

What are the business implications of the fact that people simply live longer today than they did in generations past?

VIVIANO: Life expectancy is up not only for older adults but also for pediatric survivors of complex conditions. Thanks to advances in modern medicine, for example, today we see children with cystic fibrosis, sickle cell disease, cancer and congenital heart issues living long into adulthood. For many of our patients though, this also means a need for long-term specialized care and management. The business implications for employers here seem two-fold. First, in the long run, employers will have workforce implications as these survivors grow up and seek employment benefits. More immediately, businesses are likely to see more employees with children who have some of these special needs. Historically, employers have always considered pediatric coverage essential to the health care benefits they provide. But with the health care landscape changing, employers eventually may be faced with a decision whether to include pediatric expertise in their coverage networks. At the risk of sounding a bit self-serving, we at Children’s Hospital Los Angeles believe children having proper access to pediatric experts, including specialized care, is the best way to serve employees and their families while having the best implications on overall work productivity.

What role do business owners play in improving the health and productivity of their employees?

LEVINE: It is widely accepted that a healthier workforce is a more productive workforce and over the past few years, I have seen a continued shift in the accountability of business owners in the health and productivity of their employees. In addition to competitive benefits packages, business owners have increasingly been investing in onsite wellness screenings and clinics, as well as programs to encourage healthier lifestyles. It has also been encouraging to see these employers understanding the value of diagnosis and treatment of more complex illnesses and how “getting it right the first time” can greatly improve outcomes for these employees. Benefits that include this kind of “second, or expert, opinion” support will go a long way to improve the health and productivity of our workforce.

GOMEZ: Employers have the potential to play an important and effective role in the health and productivity of their employees. In addition to provision of health benefit plans and on site health clinics, employers can implement an effective and targeted wellness program. Many health insurers offer wellness programs as part of a particular benefit or as a supplemental benefit, but non-insurer vendors are increasingly offering stand-alone wellness programs to employers,particularly those with self-insured health plans. An effective wellness program can be instrumental in achieving significant benefits for both employers and their employees, including reduced medical costs and sick days, reduction in workers’ compensation and disability management claims, increases in employee productivity and retention, reduction in employee stress, attainment of healthier lifestyles andgreater overall employee satisfaction. Notwithstanding the foregoing, employers should be mindful of legal requirements and parameters in establishing and operating such programs. Varying standards, limits and requirements, including those under theAmericans with Disabilities Act (ADA), the Genetic Information Nondiscrimination Act, HIPAA and the AffordableCare Act, can turn a well-meaning program or participation incentive requirement into a mine field of potential litigation and liability.

What other tactics are employers using to reduce their healthcare expenses?

GOMEZ: Many employers have expressed dissatisfaction and frustration with continually rising healthcare costs, as well as with healthcare quality and the results obtained for their employees. As a result, an increasing number of employers with self-funded health plans are considering or participating in alternatives to traditional procurement of healthcare benefit products and options, including contracting directly with healthcare providers for access to care, rather than contracting with health insurers for the health benefit options that they provide. These arrangements are sometimes referred to as “direct to employer ACOs” or “direct contracting.” Such arrangements can enable employers to have a more direct hand in designing the health network that is best tailored to its employees. Such arrangements set forth the range of services to be covered and require certain quality metrics and standards to be met by the participating healthcare providers. The participating employer and health system may agree to share in any savings achieved to the extent that actual healthcare costs for the employer are less than the agreed upon target spend amount, or also share in any net deficits that may materialize. In addition to potentially better and more convenient care, employee premiums are often less, as are cost-sharing obligations. Recent examples of such large-scale direct contracting models include the arrangement between The Boeing Company and MemorialCare in Southern California and GM and Henry Ford Health System in Detroit.

LEVINE: Employers are focusing on clinical areas that impact costs and workplace productivity. Across the horizon, these typically include orthopedics, cancer, cardiology, behavioral health and, for some, infertility. There is a gap in these delivery systems and forward thinking employers are working on programs to fill in those gaps. Cancer is one of the largest costs for self-insured employers and almost always ranks in the top three cost areas. While cancer typically affects only one percent of employees, it accounts for 12 percent or more of all employer health care expenditures. Effective cancer care is getting the right diagnosis from the beginning so outcomes are optimized and patients can avoid medical misadventures. Misdiagnosis, delays and inappropriate treatment plans are primarily critical to the patient but also affect the employer. So many are looking to supplement basic benefit packages with second opinion programs, center of excellence programs or even new, disruptive programs like City of Hope has introduced where our experts are available to support patients and oncologists in the health plan network to receive best-in-class care without having to leave their community.

How are the quality and review websites (Healthgrades, Yelp, etc.) influencing consumers today?

VIVIANO: In terms of patient acquisition, sites like Yelp and Healthgrades do not affect us substantially. We find that patient families still rely mostly on their own primary pediatricians to make sure they are heading to the right specialist at the right time. Both of these sources, however – review websites and pediatrician referrals – speak to the power of the anecdotal recommendation, and how people are always looking to learn from a shared, trustworthy personal experience. This is one reason we established the CHLA Health Network with hundreds of local affiliate physicians, which gives parents direct access to specialized care should their child need it, both at our facilities and at partner hospitals where we provide neonatal and pediatric care like Providence Holy Cross Medical Center, Providence Saint John’s Health Center and Providence Tarzana Medical Center. Additionally, we continue to post patient experience and satisfaction scores on our website as measured by the U.S. Agency for Healthcare Research and Quality, and we regularly publish a diverse collection of patient stories on our own blog as well.

What issues do businesses establishing urgent care centers and other non-institutional facilities face in California?

GOMEZ: Many healthcare providers, healthcare payors, private equity investors and patients are increasingly interested in effective and cost-efficient alternatives to expensive and sometimes unnecessary trips to the emergency room. Urgent care clinics often provide the convenience of extended hours and walk-in service and serve as additional points of access to care for the community as well. Nevertheless, certain legal barriers and requirements must be borne in mind. For example, due to California’s prohibition on the corporate practice of medicine, private equity investors, non-medical professionals and lay corporations cannot legally employ physicians to provide the care needed in urgent care clinics. As a result, health systems and private equity investors generally must enter into tailored professional services and management contracts (among other agreements) for the services necessary to operate the center. Care must be taken in structuring such agreements so that they do not give inappropriate control over clinical decision making to a non-professional or lay corporation. Compensation provisions must also be structured appropriately to avoid violations of Federal and California state fraud and abuse statutes, as well as fee-splitting rules.

Every large multifaceted organization carries with it a multitude of demands and shifting priorities; how do you define what is most important to your organization?

VIVIANO: We see the goal of Children’s Hospital Los Angeles as being accessible to every child that needs us, and of advancing our mission to create hope and build healthier features. To that end, we have articulated a vision for our organization that everything we do must align with this vision. Broadly speaking, this includes providing world-class compassionate family-centered care, advancing knowledge through research as a leading academic pediatric medical center, and preparing future generations through nationally recognized training programs. We are committed to rigorous planning, whether strategic, operational, or investment-related, to ensure we can grow to meet the needs of our community in a financially sustainable way.

We’re seeing more consolidations and more alignments among providers. Does this mean consumers will have fewer choices moving forward?

LEVINE: Yes, the trend is for consumers to have fewer choices going forward. This is being driven by narrow network plan designs and programs that drive you to one medical system for all of your care. This isn’t necessarily bad for common primary care conditions like hypertension and back pain, where there is ample access to adequate care and the clinical integration and care coordination add tremendous value. But the progressive employers are recognizing that for serious and complex illness, limited access to expertise is not working. It neither assures good outcomes nor affordability, and patient experience and satisfaction suffer. As these truths become more apparent to employers and benefit consultants, we’re seeing an increase in employer interest in creating benefit designs that assure access to centers of excellence like City of Hope.

GOMEZ: The answer may depend on what kind of healthcare- related choices one focuses on. For instance, if consolidation results in fewer truly separate or independent healthcare providers, whether hospitals, clinics, surgery centers, medical groups or otherwise, then there would be less choice in terms of the number of separate and unaffiliated healthcare providers to select from. However, many healthcare providers that are pursuing consolidation and/or affiliations with other healthcare providers are often doing so for a number of reasons, including obtaining greater geographic reach, greater resources to invest in enhanced or expanded patient care services, investment in additional and better technologies to provide greater access to care, including through telehealth and mobile health apps, or to improve or expand outpatient care strategies to offer more points of access to care in the community. When these endeavors are the fruits of consolidation and affiliation, greater patient choice may result rather than less.

VIVIANO: Over the past few years, Children’s Hospital Los Angeles has worked to solidify many relationships and alignments among providers. Rather than creating fewer choices for consumers, our intent has been to offer the best care options right in the communities in which people live. Our CHLA Health Network now connects more than 140 affiliate general pediatricians throughout the Los Angeles area with CHLA specialists, giving parents a literal lifeline to the expert care their child may need. CHLA neonatologists and pediatricians also help provide care at partner hospitals like Providence Holy Cross Medical Center, Providence Saint John’s Health Center and Providence Tarzana Medical Center. Finally, our doctors also meet with patients at five CHLA outpatient centers throughout Los Angeles, in Arcadia, Encino, Santa Monica, South Bay and Valencia.

What can be done to ensure quality, transparency in pricing and a reduction in the cost of health care to help consumers?

VIVIANO: One of the mantras we constantly champion at Children’s Hospital Los Angeles is that you can’t just treat children as smaller versions of adults – pediatric experts know that infants, children and teens respond to treatments and medications differently than you or I would. This also is true from the consumer perspective; adult measures of “quality” don’t always translate well to pediatric populations. CHLA is committed to understanding what quality measures, including health outcomes, matter the most for pediatric patients to ensure that our families are confident they are getting the best value and quality care. We do believe getting things right the first time is the best way to reduce health care costs – that is, finding the right expert for each patient ensures the best likelihood for a high quality outcome. This aligns with our goal to provide compassionate transformative care and, from a business perspective, also minimizes waste from undertreatment, overtreatment and other inefficiencies that can elevate the cost of health care. On the consumer end, I believe it’s important that families be proactive and study their employer insurance plans to make sure there are no gaps in coverage that would deny them benefits and increase out-of-pocket costs for care.

Looking to the future, what do you think the health care landscape will look like, say, five years from now?

GOMEZ: First, healthcare and payment will likely continue its march toward greater immersion in value-based and risk-based payment models. The current Administration appears to be continuing the move toward government payor value-based and alternative payment models and accelerating the shift of financial risk (and potential upside) to providers, but also appears to be taking steps to offer providers greater flexibility in how to reach certain quality and other payment-related requirements. Second, more healthcare will likely be provided in outpatient settings, lower acuity care settings, through home healthcare and in the form of non-medical home care (e.g., assistance with activities of daily living). As healthcare payment models continue to shift, acute and inpatient care settings will increasingly be viewed more as cost centers as opposed to drivers of revenue, although inpatient and acute care will always be an essential service. Third, there will likely be fewer and larger healthcare systems and hospitals five years from now. Transactions and affiliations may be more focused on developing and driving stronger outpatient, mobile and virtual service lines and initiatives rather than larger inpatient facilities. Fourth, more employers will contract directly with healthcare providers for health services for their employees. Many employers are coming to view this option as a better and more effective method to tailor the network of providers, patient care services, and geographic areas available to their employees as well as to potentially better manage and contain costs for themselves and their employees. Fifth, changes in payment, laws, technology, social attitudes and high profile news events, among other things will continue to drive significant additional investment in and access to a range of behavioral health facilities and services.

LEVINE: It is hard to ignore the political landscape, particularly in California where there are discussions related to single payer and universal health care. Regardless of the outcome, I’m confident there will be ongoing consolidation and focus on the rising costs of treatment. We’ll also see rising costs to the consumer either directly through cost shifting or through taxes. The trend will continue toward narrow network products … and unfortunately, perhaps narrow benefits. In rapidly evolving fields like cancer, we’re already seeing that the gap between usual care and best-in-class care, is widening. It is incumbent upon those who influence health care to seek programs that protect consumers battling serious illness, assuring they have access to the kind of care we would want for family members. I am excited that City of Hope is on the forefront of the cancer revolution and is already thinking about practical ways we can provide best-in-class care to cancer patients, be it are our main campus, our community network or through our newly developed employer focused oncology management programs that support patients regardless of where they may live.

VIVIANO: We’ve seen an increase in the complexity of the patients that we serve and we believe the next five years could continue that trend. Partly, this is due to the success of modern medicine. Advancements in personalized medicine like CAR-T cell therapy for leukemia, so called orphan drugs like Nusinersen for spinal muscular atrophy, and new procedures for repairing heart defects in utero are helping children survive formerly life-threatening conditions. Increasingly, we’ll have a better understanding of the unique genetic underpinnings of care and be able to tailor treatments more than ever to the individual patient. However, this also means we have more kids with chronic conditions and chronic needs, which will continue to stretch the capacity of all healthcare facilities. At Children’s Hospital Los Angeles, our average daily census has increased more than 8 percent in just two years, and our Emergency Department, which was designed to comfortably handle 65,000 visits a year, will provide care for more than 95,000 visits in 2018. Thanks to the help from generous community benefactors and careful budgeting, we continue to find ways to stretch our capabilities. This is one of the reasons we are supportive of Proposition 4 on the California ballot this November, the Children’s Hospital Bond Act of 2018, which will help provide a much-needed supplement to capital projects for more than a dozen children’s hospitals across the state, allowing us to serve more children, including those from low-income households and those with complex needs.

Return to Index

For reprint and licensing requests for this article, CLICK HERE.