North Carolina Healthcare Leaders Reception Event Recap

Thanks to all of you who attended our recent program here in Charlotte at the Ritz-Carlton titled “The State of Healthcare in North Carolina: Hospitals and Surgery Centers.” We had a full house for the complimentary event. We also wanted to thank our lead speaker – Howard Salmon, Vice President, Premier Consulting Solutions – who spoke on “The State of Healthcare 2010: A Watershed Year”. We also want to thank our panelists, Jennifer Schenk, General Counsel, OrthoCarolina; Ted Lotchin, Assistant General Counsel, UNC-Chapel Hill; Andrea Wever, Associate General Counsel, Carolinas Healthcare System; and Jeff Fox, VP of Development, Surgical Care Affiliates. We were very pleased to have a range of perspectives on the panel, and it provided an excellent opportunity for dialogue with industry leaders from an academic medical center, a large health system, a large physician practice, and an ASC management company. Below are a few highlights from the program.

Four key trends emerged from our panel discussion:

Greater Physician Integration. Several of the panelists highlighted the fact that they saw increasing integration between hospitals, physicians and ASCs and other outpatient services. These come in the form of joint ventures, co-managements and direct employment of physicians by hospitals. This is especially true as several provider types are moving towards an accountable care organization (“ACO”) model, where closer integration and shared cost savings and efficiencies will become critical. In particular, Jennifer Schenk pointed out that there is increasing integration in technology where hospitals and physicians are increasingly using the same information technology and collaborating on the types of medical supplies used in patient care. In the clinical setting physicians are having greater input into the way care is delivered. Similarly, in management, physicians are having more involvement with (and responsibility for) achieving efficiency and quality improvement. Increased integration is also being seen within existing organizations. For example, Ted Lotchin identified that there has been a renewed focus at UNC to more tightly integrate the UNC Hospitals with UNC Physicians and Associates and the recently established Triangle Physician Network, all of which are under the UNC Healthcare System umbrella.
Decreased New Development and Continued Funding Challenges. As specifically pointed out by Jeff Fox, the number of de novo or new development projects in the healthcare world has drastically dropped the last couple of years. This is due in large part to economic factors and, as downward pressure on reimbursement continues, the healthcare industry and the capital markets have much less appetite new investments. In certain states there is even a perceived over-supply of certain types of provider types. In several states across the country, transactional activity has centered on turn-around projects and mergers to achieve economies of scale rather than new development of healthcare facilities. In addition, funding challenges continue for any projects that require debt financing. Although we have seen somewhat of a loosening of the credit markets, lending is still limited to those most creditworthy projects that need financing.
Distributed Care Models. Andrea Wever highlighted the key trend of distributed care models with which Carolinas Healthcare System has had direct recent experience. In November 2009 it opened its first “healthplex” or health pavilion location at CMC-Steele Creek. This is the first health facility of its kind in the region and features eight emergency department beds, two observation beds as well as a laboratory, diagnostic imaging, a pharmacy and a medical office building for physicians. This is a facility designed to be open 24 hours, but is akin to a “hospital without beds” where patients can receive urgent and emergency care but is not intended as an overnight or long term in-patient hospital care setting. This highlights the trend away from a single hospital facility model to a more distributed model of care with new urgent care and healthplex-type facilities in outlying areas where population growth and market forces would not justify building an entirely new in-patient tertiary care facility.
Consolidation. All of our speakers highlighted the movement toward consolidation across all areas of the healthcare industry. For example, Jeff Fox mentioned that much of his company’s development efforts are focused on adding existing centers to their chain in connection with physicians and hospitals. Similarly, Carolinas Healthcare System now manages more hospitals than it owns. This is true as well on the physician side as evidenced by OrthoCarolina, which is the largest leading orthopedics group in the region. From hospitals to ASCs to physician groups, all of these areas are experiencing tremendous consolidation and we expect this trend to continue for the foreseeable future.

In addition to the panel discussion, Howard Salmon’s presentation on the “State of Healthcare 2010: A Watershed Year” was excellent. He highlighted a number of key statistics regarding healthcare costs including expenses related to medical device spending, the impact of chronic diseases and obesity, and the interplay of cost with quality. He went on to describe some of the challenges and opportunities that the healthcare reform legislation poses. He repeatedly stressed the need for greater focus on value and quality in delivery of care. Premier, for example, is involved in key solutions such as providing focus on value-based purchasing, pay for performance and the soon-to-be implemented accountable care organization (ACO) model. If you would like a copy of Howard’s presentation, please feel free to contact one of us directly.