Q&A

Q&A with John McWhorter III, President of Baylor University Medical Center and SVP of Baylor Health System

We were fortunate to engage John McWhorter III, President of Baylor University Medical Center and SVP of Baylor Health System in a written interview regarding his organization’s strategic priorities. His responses are reflected below.
 

What specific opportunities and challenges does reform create for your organization?

Opportunities
For Baylor Health Care System, as for other hospitals and health systems, reform should result in more people obtaining some form of government sponsored or government assisted payment for health care.  The 18-26 year old population has benefited from insurance reform allowing students and young adults to remain on parents’ insurance policies.  Affordability for private insurance should go up as premiums drop. 

The design of incentives across all groups (hospitals, physicians, consumers, and insurers) should improve.  Incentives to provide value-based care and eliminate waste should be enhanced.  We will move from a “per-click” to a bundled payment.  For Baylor this means opportunities to provide direct contracting with employers, bundle payments with post-acute care providers, and study the option of providing “carve-outs” for chronic diseases.

Incentives surrounding implementation of electronic medical records for all stakeholders are also enhanced under health reform.  Baylor is undertaking a massive ($200 million plus) electronic conversion including physician offices, clinics, and hospitals that should be complete in 2013.

Reform will also result in more accountability for the patient in the form of higher out-of-pocket costs and more responsibility for personal care; we will discuss Baylor employees and personal care in the next few questions.

Challenges
Some states will not implement a state exchange (Texas being one of those states) and we have yet to see what a federal exchange would look like.  Additionally, there are 100,000 or more pages of regulations to be written all impacting delivery of care.  We have many unknowns; who will collect 1040 information to determine level of income for employees to qualify for an exchange? How will penalties be collected? 

States such as Texas that will not accept Medicaid expansion will really harm hospitals like Baylor.  We will lose disproportionate share funds (millions) with no relief from the uninsured.  Best-case scenario in Texas was that half of the uninsured would have access to a payment; without expansion of Medicaid that number will be less than 20 percent.  Of 6 million uninsured Texans (27 percent of population) less than 1.5 million will be eligible for Medicaid.
 
We should also mention that ICD-10 will eventually be implemented which will have a significant impact on rural providers and small hospitals.

How is Baylor adapting to new payment models since a major thrust of the Affordable Care Act is to transfer payment risk to hospitals?

Baylor accepts the premise that legislators will try and transfer insurance risk to providers in the form of Accountable care.   Baylor is addressing this in six areas: (a) using our employee group as an experimental insurance pool,  (b) partnering with insurance companies to reduce unnecessary care in a shared savings model, (c) direct contracting with large employers in narrow networks, (d) developing an accountable care organization called Baylor Quality Alliance, (e) developing a robust post acute care network for bundling, and (f) exploring insurance options for the future.

Baylor Quality Alliance is our version of the ACO with nearly 2,000 physicians participating.  The physicians will be working on standardization of care, reducing variation, adopting best practice, and sharing in cost savings models approved by the federal government.  The BQA will provide care for all Baylor employees in the future which is a group of 34,000 insured lives.  It is conceivable that Baylor along with other large health systems will partner together to reach 100,000 insured lives managed by an employee group. 

Baylor already has direct contracts with two of the largest employers in the country in the Dallas Fort Worth area.  These are narrow networks with substantial out of pocket costs for employees who receive care out of network.  We also have an agreement with a large insurance company that shares savings on readmissions for several key conditions.  The shared savings model is a 50/50 split of savings.

Baylor has developed a robust post-acute care network including four inpatient rehabilitation hospitals, 38 outpatient clinics, one LTAC, and two inpatient hospice units.  This will be useful for bundling of orthopedic procedures and other conditions in the future.

The entirety of John McWhorter’s remarks may be found in the White Paper published following our November 19th webinar, "Seizing Opportunity in the Wake of Reform”. Driven by a survey of our network of hospital systems, health plans, and innovative health care companies, we sought to identify how high-performing institutions are adjusting their strategies to the post-reform reality. The study can be accessed here.