NHRMC’s advisory group looks ahead to finishing RFP in coming meetings [Free read]

WILMINGTON — Last week the Partnership Advisory Group, which is advising New Hanover Regional Medical Center and New Hanover County on an exploration of sale and partnership options for the hospital, finished discussing key objectives for a new partnership. Next week, the group aims to start formalizing a request for proposals and pick at least five potential partners.

The Partnership Advisory Group (PAG) was created by the county to increase community involvement in the exploration of a potential sale or new partnership (although it is not required by the state statutes guiding a sale process). You can find agendas and presentations for upcoming meetings, along with past meeting minutes (once approved), on the NHRMC website.

As part of that process, the PAG is tasked with translating strategic and long-range goals of the New Hanover Regional Medical Center (NHRMC) into a Request for Proposals (RFP), which will solicit concrete offers from healthcare systems to purchase, manage, or partner with the hospital. It’s worth noting that the PAG has announced that after finalizing the RFP, it will spend two months examining options for maintaining NHRMC’s independence.

Related — Deep Dive: Vetting the allegations, accusations, and theories surrounding NHRMC’s sale exploration

The PAG has also been discussing industry changes that will shift how hospitals are reimbursed for care. While the industry is in the early phases of this shift, and it is unclear how it will impact mergers and partnerships, hospital officials claim that a shift to what’s known as ‘value-based’ pricing will prevent the increases in healthcare costs associated with many recent hospital sales and restructurings.

Crafting a Request for Proposals

In terms of the RFP, translating NHRMC’s strategic goals is the first of six ‘deliverables,’ and one of the most important. These deliverables and votes will be:

1. Identify the goals and objectives for NHRMC to be included in the RFP
2. Identify a list with a minimum of five potential buyers or partners to receive the RFP (other interested parties beyond this list are expected to submit proposals, as well)
3. After a public hearing on proposals and due diligence, the PAG will vote on a list of two to three partners to research further
4. The PAG will decide either to (a) not move forward with exploring a sale or partnership, or (b) pick a preferred partner (or combination of partners) and identify core considerations to negotiate in a letter of intent (LOI).
5. While conducting due diligence on a deal, the PAG will also vote to identify key terms and conditions of the agreement.
6. The PAG will attend a public hearing on a final draft of a definitive agreement and make two final recommendations on whether that document is in the best interests of NHRMC and the county. The PAG’s final vote will whether or not to support a final definitive agreement

Framing the RFP will in large part set the expectations for new partners. AS NHRMC President John Gizdic and County Manager Chris Coudriet have reiterated on numerous occasions, NHRMC and the county aim to use the hospital’s current fiscal health and industry reputation to leverage more from a possible partnership — in other words, negotiating from a “position of strength” will allow NHRMC to make bigger ‘asks’ in an RFP, according to officials.

How effectively NHRMC can leverage its position will be difficult to publicly evaluate until the county has received proposals. While the county and NHRMC have done some preliminary market research, and have more than likely been made aware of some potential overtures, it’s the details of an offer that will make the difference — details Coudriet and the county said would be made public, along with the RFP itself, as part of the process.

Ten strategic goals and objectives

In November, the PAG discussed the first of five of ten total goals; last week, the group completed this review.

The goals discussed at last week’s meeting, according to NHRMC, were as follows:

• Driving quality of care throughout the continuum. This goal focuses on providing consistently high-quality care and coordination through every step of a patient’s care. This includes how information is shared between health care providers in different settings, from primary care practices, to hospital-based physicians, and post-acute care facilities such as nursing homes. Members of the Advisory Group talked about the increasingly important role of advanced care providers and nurses as part of this effort to cost-effectively manage patient care. They also discussed the cost of technology and data systems to monitor quality metrics and use them to make improvements.
• Improving the level and scope of care. This goal calls for protecting and strengthening the services available and accessing new and innovative technologies. Priorities include keeping all existing services and adding more so area residents don’t need to leave the area for specialized care. It also means ensuring that all residents have access to these services, regardless of ability to pay. The group talked about the importance of innovation and how NHRMC can accelerate the use of new therapies locally.
• Investing to ensure long-term financial security. Gaining access to capital and resources to sustain growth and allow NHRMC to withstand cuts to reimbursements while adapting to changes in the healthcare industry is the focus of this goal. It speaks, in part, to NHRMC’s ability to fulfill its capital plan, which includes the construction of new facilities to serve area residents. Construction projects on the horizon include a new emergency department to replace the one on the Cape Fear campus, a new hospital in the Scotts Hill area with a focus on orthopedics, and additional locations for outpatient care in the region. The group discussed how investments in new services and technology are critical to meeting the needs of area residents but come with risk as reimbursements are being cut.
• Strategic positioning. NHRMC’s position in the region is the focus of this goal.  The Advisory Group talked about strengthening NHRMC’s relationships with other hospitals and health providers and bringing opportunities for NHRMC to expand. The group discussed whether a potential partner would consider moving or growing key services in this region, expanding the economic base and making Southeastern North Carolina more of a destination for specialized healthcare.
• Governance.  This goal focuses on establishing the most effective form of governance to preserve and advance local interests. Objectives include maintaining local control of hospital-based provider contracts and preserving existing relationships with independent practices.

Advisory group members also discussed their changes to the first five sets of goals and objectives reviewed at the previous meeting. Those included:

• Improving access to care and wellness. The advisory group added objectives around increasing access to home care, promoting cost transparency, and improving access to women’s and geriatric services.
• Advancing the value of care. Members added clarifications around reducing the cost to deliver care while maintaining and improving quality.
• Achieving health equity. Advisory group members listed expanding the reach and number of community healthcare workers to improve the health in underserved communities as an important objective. They also called for further engaging employees in the organization’s efforts to achieve health equity through education and training.
• Engaging staff. Protecting the benefits and jobs of those who work in the NHRMC system and reducing turnover were among the priorities for the advisory group. They also added objectives around developing careers in healthcare through training for local residents and developing plans specific to nurse recruitment and other key shortage areas.
• Partnering with providers. Advisory Group members discussed ways to preserve and strengthen the relationships physician and advanced practice providers have with NHRMC. They added objectives around research, adding specialized services, and supporting and aligning with providers to improve healthcare services in the community.

The cost of care and value-based pricing

The conversation about value-based healthcare is important because it has been NHRMC’s response to the most persistent critique of a sale; the majority of experts (across the ideological spectrum) agree that under the traditional ‘fee-for-service’ system where hospitals bill customers and are reimbursed by insurance companies for individual items costs go up when hospitals and healthcare systems combine. In short, larger healthcare networks have more bargaining power and can charge insurance companies more, which in turn drives up premiums for customers.

You can find an in-depth look at the issue here — Deep Dive: Here’s what the ‘uncharted waters’ of NHRMC’s potential sale look like

Gizdic and other officials have acknowledged, with some reservations, the risks of mergers. Their counter-argument has been that a shift to ‘value-based’ care disrupts the traditional incentives for billing. The argument goes that hospitals would be reimbursed only so much per patient; because of that, the revenue incentive becomes to make sure a patient is overall healthier and needs fewer services instead of billing them more for the services they receive. While a ‘value-based’ system could pose its own challenges for patients and healthcare providers, officials argue that it could also prevent the increase in premiums associated with many hospital mergers.

According to NHRMC, “the cost of care was raised as the group discussed advancing the value of care. Members of the Advisory Group said they want to ensure any path forward would continue the work NHRMC has been doing to bring costs down while improving the quality of care. Discussions touched on the success NHRMC has had managing costs for the 19,000 patients who are a part of its Accountable Care Organization (ACO). By carefully tracking and guiding care for those patients, NHRMC’s ACO achieved the highest level of quality scores and saved Medicare $5.3 million in 2018.”

That led to a discussion of value-based healthcare.

According to NHRMC, “expanding that effort to more patients is both desirable and necessary as more reimbursements will be tied to ‘value’ in the future. Value contracts pay health systems a flat fee per person, rather than paying for each medical service they need, regardless of how complicated their conditions. Government insurance providers are moving in that direction, as are the private insurers. Blue Cross Blue Shield NC is requiring NC health care systems to enter into value contracts as their contracts come up for renewal. Many of the state’s largest health systems are already working within these contracts and NHRMC’s contract comes up for renewal in 2020.”

This, according to NHRMC, is where the argument against the traditional critique of mergers comes in.

“As this shift happens, the old model in which mergers could lead to higher costs becomes less relevant, because everyone needs to lower costs to succeed. The advantage for larger health systems will come from their ability to invest in the technology and expertise to manage the population’s health risks and keep per person expenses down,” according to NHRMC.

Next steps

At the upcoming PAG meeting, the last of the year, the group is slated to finalize RFP questions and select at least five healthcare systems to send those questions to. Officials have noted that while the law requires at least five to be sent, the PAG may receive additional requests for RFPs, and those healthcare systems will all receive on; in the end, more than five RFPs may be sent out, and more than five responses are expected.

Due to the PAG has only begun discussing potential RFP questions at the latest meeting, the process of crafting an RFP may carry over into January.

The upcoming meeting is scheduled for Thursday, December 19. It will be held at the New Hanover County Government Center, 230 Government Center Drive, Suite 135. The meetings are open to the public but it is important to note there are no public comment sections of the meetings.

You can find the presentation from last week’s meeting here. NHRMC keeps all public information about the potential sale process here. Those interested can sign up for email updates here.

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Send comments and tips to Benjamin Schachtman at ben@localvoicemedia.com, @pcdben on Twitter, and (910) 538-2001