PROVIDENCE – The illusion that there was any semblance of a coordinated statewide system of health care delivery in Rhode Island is quickly disintegrating, much like the ice shelves breaking apart and falling into the sea in Antarctica, under the weight of a changing business model that rewards population health and regional coordination of care.

On May 3, the boards of Southcoast Health and Care New England announced the next step forward in their affiliation process to create a two-state, eight-hospital, $2 billion-plus not-for-profit health care system, with more than 15,000 employees.

The new affiliation would span a broad geographic region in Southeastern New England and offer an integrated network of comprehensive patient services, according to the news release issued by the two health systems.

Under the proposed framework for the as-yet-unnamed new entity, Keith Hovan, Southcoast Health’s president and CEO, will serve as president and CEO of the new health system’s parent company, and Care New England’s CEO Dennis Keefe will become the CEO of the Population Health initiative in the unified system, building upon the Integra accountable care organization created at Care New England.

The next steps include: executing the agreement, initiating the required regulatory review processes in Massachusetts and Rhode Island, and conducting continued due diligence. If all goes according to plan, it is possible that the affiliation could be approved by the end of the year.

Redefining risk, competition
The proposed affiliation changes the dimensions of the health care landscape in Rhode Island, adopting a regional approach to managing population health.

For much of the last decade, competition in the delivery of health care in Rhode Island has been defined by both largesse and scarcity: too many providers and medical facilities competing for too few patients, with ever-increasing medical costs and ever-decreasing patient satisfaction.

In turn, the business model for running an independent acute care community hospital has become mostly untenable and unsustainable – only one remains in Rhode Island today. The trend toward consolidation is not unique to Rhode Island, it is very much part of a changing national landscape, driven by changing federal reimbursement polices with Medicare and Medicaid, pushing bundled payments for a continuum of care.

And, despite the best of intentions by the R.I. General Assembly and the state health bureaucracy, no statewide health care planning document exists, leaving Rhode Island vulnerable to the vagaries of the marketplace and consolidation by out-of-state health systems, both for-profit and nonprofit.

That said, the proposed affiliation between Care New England and Southcoast Health could offer a new way to redefine the marketplace competition: instead of a competition between silos of services, the competition would be based upon patient satisfaction, quality of outcomes, affordability and coordination of care.

Trends
The new consolidated hospital systems are being asked to function more like insurance companies, calculating and managing risk across a continuum of care, negotiating reimbursements for providers while at the same time coordinating the flow of information between providers and patients with sophisticated health IT analytics.

Will that make the current role of health insurers redundant? Will that inexorably lead to a single-payer system of health care? Good questions.

In the next few weeks, Blue Cross & Blue Shield of Rhode Island is expected to name a successor to Peter Andruszkiewicz, the current president and CEO of the state’s largest commercial health insurer, who joined Blue Cross five years ago in 2011.

The next leader at Blue Cross will no doubt re-evaluate the $60 million in investments that the insurer made under Andruszkiewicz in the patient-centered medical home model as well as the commitment to have 80 percent of all insurance contracts with providers to be done as bundled payments by 2018.

With UnitedHealthcare’s withdrawal from Rhode Island’s health benefits exchange, with Tufts Health Plan’s new partnership with Lifespan, and with Neighborhood Health Plan’s emergence offering commercial health insurance products, the insurance marketplace is very much in flux.

Interview with Keefe
Following the latest announcement, ConvergenceRI spoke with Dennis Keefe, the current president and CEO at Care New England, to get his perspective on the process moving forward, with a focus on his views about the changing landscape of health care in Rhode Island, the region and the nation. For obvious reasons, Keefe did not discuss any of the potential regulatory hurdles ahead.

ConvergenceRI: Under the new affiliation, you will be in charge of the new entity’s Population Health initiative. Could you define, in your own words, what you mean by population health?
KEEFE: Population health is where the government is going, and I would add, Rhode Island is going. We’re going to a future where the government is strongly encouraging alternative payment models, encouraging [hospitals and providers] to take more risk, with Medicare Shared Savings ACOs, with Next Generation ACOs.

The state [of Rhode Island] has also encouraged the development of accountable entities; we’re an approved accountable entity with Medicaid [in partnership with UnitedHealthcare.]

Certainly the commercial insurers are going in this direction. Blue Cross has set a goal that by 2018, I believe, 80 percent of their payment agreements will involve risk sharing of some type.

The whole idea is moving away from volume to value, toward the triple aim of promoting lower cost, better patient experience and better quality of patient safety.

The incentive system of how we are paid changes significantly. It incentivizes really good outcomes, and not just for providing care, with a fixed or global payment for a population.

The heart of population health is global payments to provide for all of the health care needs for a patient and a population.

If we do better than the global payments, we retain the savings; if we don’t, we incur the losses.

The fixed payments are for what we provide, no more, no less, and the financial incentives are tied to very, very significant quality metrics.

ConvergenceRI: Is there a need to distinguish between fee-for-service and bundled payments moving forward, given that you will be straddling both systems for a while?
KEEFE: It’s a bit schizophrenic; we definitely have feet in both areas, and there is a transition.

The best principles of population health management apply for both worlds – really effective integration across services and being able to provide a full continuum of care across care settings, moving care to the least expensive, most appropriate setting for that care, instead of defaulting to the most expensive.

For us, it’s a journey.

ConvergenceRI: What have you learned from the creation of Integra, the hospital-wide accountable care organization developed by Care New England?
KEEFE: Approximately 20 percent of the population incurs about 70 percent of the expenses of delivery care in the system. What works really well with that reality is very intensive, case management or care management of the most seriously ill population, whether it’s medical, or mental and behavioral health, with a focus on intensive health and care coordination.

That has been a big take-away, as we’re trying to build our infrastructure.

Another big take-away, which is probably more obvious, is the importance of deploying electronic health records in every way possible, which is a tool that really helps in managing and coordinating care.

The need to invest in intensive case management of the most complex populations is another huge take-away, recognizing the fact that a huge number of people in those populations may have behavioral health conditions.

ConvergenceRI: What do you think is least understood about the changing health care landscape?
KEEFE: I think that people believe that there is a system of care out there, and that system is coordinated and efficient and effective, with collaboration and coordination. Nothing could be further from the truth.

We need to get away from the silos of care. We need to improve the communication, through electronic health records, reducing duplication, reducing waste, doing everything possible to coordinate the care, so that people understand that they are part of a system, offering greater efficiency, effectiveness and better outcomes – at a lower cost.

Coordination of care across many settings has been abysmal – inpatient, skilled nursing facilities, long-term care, and hospice. We need to create the electronic health record connectivity.

ConvergenceRI: If you can, can you describe your expectations for the regulatory process moving forward?
KEEFE: My opinion and my hope is that we can get this done by the end of the calendar year, in the next eight months. That’s my opinion and hope.

Many factors are out of our control. I’m a glass-half-full guy; I believe we can get this done.

This is not the kind of coming together of two organization that should be controversial under the Affordable Care Act; it is really should be an approach that would be welcomed.

This is happening all over the country; it’s pretty common for health care systems to be forming within states and regions.

In Rhode Island, hospitals are struggling hugely financially. The two biggest health care systems are both losing money.

But, even as we have been losing money [at Care New England], we are preparing for population health, with new positions and new infrastructure.

To the degree that you can really partner with another organization, such as Southcoast, and through that partnering create a stronger health care organization, that is one way of meeting the challenges of the future.

Larger organizations do provide scale. When you eke out a 1 or 2 percent bottom line, 1 billion vs. 2 billion [makes a big difference].

With the emphasis of population and the implementation of the Affordable Act, increasingly we are more like an insurance company.

With Southcoast, we’ll cover more geography; that’s the idea.

ConvergenceRI: How do you view the current competition in the marketplace?
KEEFE: I think competition is good; I think it’s healthy. I think, potentially, a strong major health care system in the region could be good for everyone.

It shouldn’t be an arms race, where we’re competing about the same services.

We need to compete on patients’ experiences, costs and safety, based upon the best service we can possibly provide across all settings. It’s really about understanding quality and metrics.