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For hospital systems, careful bets on patient population help chart course for future

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Barry Rabner of Princeton HealthCare System.
Barry Rabner of Princeton HealthCare System. - (NJBIZ file)

The state's hospital systems are moving in opposite directions as they strategize how to deal with the final push of Affordable Care Act implementation. And neither strategy is without risk: While some systems could fall behind the reform movement as they wait to see what happens, others may get too far ahead as new models undergo real-world testing.

"People are placing different bets on how effective health reform is going to be, and ultimately, where the system is going in the next five to 10 years," said Derek DeLia, an assistant researcher with the Rutgers University Center for State Health Policy.

DeLia said the deciding factor for a system is whether executives believe the law's payment reform models are how all health care systems will operate in the near future, as well as what population a hospital serves.

Geography plays at least some part. Population management is a key strategy for urban hospitals, as they aim to bring in large numbers of residents who will suddenly be insured under the ACA. Suburban hospitals in more affluent areas have generally marketed expensive services to those populations, and don't want to let go of that strategy.

For the Princeton HealthCare System, president and CEO Barry Rabner said the answer to the big question is keeping an eye on payment reform while continuing to focus on volume-driven, fee-for-service care.

"The economic well-being of the institution today depends on volume — and not just volume, but the source of payment for the people you're serving," Rabner said. "There's this push to treat patients of higher acuity and provide higher-margin services and to avoid, to the degree you can, the provision of free care. That's all wrong, that's all unfortunate, but it's a major driver in every hospital system."

Because of Princeton's patient mix, Rabner said, the Affordable Care Act will take longer to affect his facility than others, which is why he's hesitant to abandon the traditional model.

"It's really insurance reform, and it's fundamentally about providing coverage to millions of people who weren't covered before," Rabner said. "Most of the people we provide free care to are undocumented immigrants, and they're not covered by the changes in the Affordable Care Act, so we don't think it will affect us that way."

Rabner said the rate of change is not fast enough, or incentivized enough, for Princeton to make any drastic changes to its operations, as it provides care mostly for a privately insured population.

DeLia also said the strength of incentives for payment reform was not enough for many systems to embrace fully switching to bundled payments, population management or accountable-care organizations while these models were still in trial phases.

At the other end of the spectrum is Barnabas Health, where president and CEO Barry Ostrowsky is "very committed to population management" as a strategy, with or without incentives.

Ostrowsky said incentives are "in the very beginning stages" of affecting changes.

"The ACA really is about a series of possible initiatives, and trying to evaluate which one of them or how many of them will eventually help us migrate to effective population management," Ostrowsky said. "None of them individually supply a sufficient financial incentive yet, but each of them, once fully mature, have the possibility to do that."

Barnabas Health's population management strategy is most evident in its foothold in Essex County — with Clara Mass Medical Center, in Belleville, St. Barnabas Medical Center, in Livingston, and Newark Beth Israel Medical Center, as well as potentially growing to include managing University Hospital, in Newark. The system also is in discussions with Jersey City Medical Center, in Hudson County, which would put even more North Jersey citizens within close proximity of a Barnabas facility.

"With that inventory of facilities and physicians that are affiliated with those facilities, we think we can go to the public that lives in the Essex and Hudson county areas, and some of the adjacent county areas, and say we have a full-service health care delivery system, everything from basic outpatient care to the most complex care in the state of New Jersey," Ostrowsky said.

Gov. Chris Christie's announcement during the budget address that the state would expand its Medicaid program as prescribed under the ACA will add to the population of insured patients in the Hudson-Essex area. Ostrowsky said Barnabas would continue to look at expanding its Essex and Hudson reach whether or not the expansion happened, but the additional insured patients offer a "certain advantage."

DeLia said he anticipates that focusing on managing the health of large swaths of people will eventually become the most financially stable way to provide health care, but hospitals will be able to survive on the traditional volume-based models for a while before being forced to adapt.

Rabner said one of the top challenges he faces in the near future will be knowing when to fully implement all of the changes he knows are coming down the road.

E-mail to: melindac@njbiz.com
On Twitter: @mcaliendo33

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