When Steward Health Care announced last week that it was buying five hospitals from Tenet Healthcare Corp. for $1.1 billion, what didn’t get much media attention was the organization’s history of coordinating care among downstream providers.
Steward, the largest private, for-profit hospital system in the U.S., has developed a systematic approach that builds in risk-sharing and drives care to preferred providers — including post-acute operators such as nursing homes — in all the markets it already serves.
That’s according to Regional Vice President Jason Worthen, who spoke about Steward’s role as a payer a week before closing a deal to absorb the Tenet hospitals and enter the South Florida market.
“When we look to enter into new markets, you’ll see us look at a hospital acquisition play because if you can get the hospital asset, then you control 50% of that healthcare vertical in the family,” Worthen said at the Synergy Summit on June 9. “Then we go out and get the pull-through through the risk contracts…. In all of our markets where we have hospital assets, really the hospital asset is there to help us support management of a total cost of care.”
Nursing homes and other post-acute providers are key to that strategy, and Worthen stressed the need for operators of such facilities to tackle risk and to prove they can be successful when it comes to key metrics that generate savings.
It’s not all about caring for short-term patients, especially in states like Florida, where 20.5% of all residents are 65 or older.
Worthen said his system relies on strong post-acute providers who know how to communicate about long-term patients with chronic conditions and get them required services such as annual check-ups with primary care physicians or diabetic retinal screens.
“I think the greatest risk of performance is not collaborating correctly to manage documentation of chronic disease,” he said. “Under risk contracting, that is probably the single greatest lever of what differentiates whether you’re going to drive value and make money through these contracts or not.”
Building verticals across the U.S.
Steward operates hospital systems in 15 states. Overall, it manages 2 million patient lives through integrated care models, including ACO networks; physician-led organizations; Medicare Shared Savings; Medicare Advantage contracts; Medicaid Managed Care; its own, 5,000-physician Steward Health Care Network; and through payer contracts with affiliated providers.
“There’s all kinds of different relationships as far as the risk gamut. Everyone in the risk world, from an investment standpoint, wants to be diversified in all these different lines to make sure you can manage different populations effectively,” Worthen said. “There’s always that relationship of, ‘If you do this to help me generate margin, then I will share in that profitability with you through some type of contract mechanism.’ And that’s really Steward.”
For post-acute care, Worthen said Steward tracks data for providers inside and outside of its network, pushing especially to lower readmission rates and shorten lengths of stay to retain more of its capitated payments. The goal is not just to squeeze post-acute providers, who typically account for 3.5% to 5% of spending per episode. Instead, the aim is to understand how some SNFs head off the need for more costly acute care in the future.
That’s not all bad news, Worthen said, at least not for post-acute providers who can demonstrate that their strategies are helping their hospital partner reduce risk. In some models, payments are tied to risk scores. If that score improves by 5%, the per-month, per-patient premium corresponds. On an average $1,200 monthly payment, 5% equals $60.
“That’s still really, really important for the revenue management piece in a lot of these contracts, especially MSSP and Medicare Advantage. It’s dollar for dollar,” Worthen explained. “That’s a big deal, right? All of us think about our margins that we operate on. If we’re not managing the revenue side of any risk contract correctly, then that gets to be a challenge above all else. It’s a no margin, no mission kind of deal.”
In Florida, Steward will acquire Coral Gables Hospital, Florida Medical Center, Hialeah Hospital, North Shore Medical Center and Palmetto General Hospital in Miami-Dade and Southern Broward counties. Those five hospitals posted operating margins spanning negative 5.5% to positive 8.2% in 2019, as reported by ModernHealthcare.
Smoothing out that financial performance will be critical for Steward as an owner and health plan operator.
“Health plans care about their margins above all other things,” Worthen said. “They have a budget on medical expense that they’re trying to achieve. They care about quality and driving share through quality…. But at the end of the day, every time you enter a negotiation with a payer, it’s all going to be around how do you drive greater margin for that payer.”
