Rancho Los Amigos National Rehabilitation Hospital Market and

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Rancho Los Amigos National Rehabilitation Hospital Market and Powered By Docstoc
					Rancho Los Amigos National Rehabilitation Hospital
                 Market and Operational Analysis
                     Evaluation of Alternative Governance Options


                                             Presented
                                         January 6, 2003




                                                      Gill/Balsano Consulting
                                                      6525 The Corners Parkway, Suite 450
                                                      Norcross, GA 30092
                                                      404.231.4422
Agenda
 Introduce Gill/Balsano Consulting
 Review Project Objectives
 Review Findings to date
   Strengths and Weakness Analysis
   Market Feasibility
 Discuss Options and Next Steps



                      Page 2
Gill/Balsano Consulting
Gill/Balsano Consulting

 Founded in 1994 – Senior staff together since 1990
 Nationally recognized for rehabilitation and post-
 acute care strategic planning and integration
 Client loyalty characterized by high volume of repeat
 business
 VHA Consulting Services
   Preferred vendor for post-acute consulting
 Acquired in 2001 by Cross Country Consulting,
 bringing healthcare consulting staff to over 100
 professionals
                           Page 4
Gill/Balsano Consulting

 Predominant work in area of strategic planning
 Consultant strengths in:
   Market penetration strategies including needs of acute care
   referral sources
   Reimbursement (federal, state, commercial)
   Operational support and turn-around assistance
 Consulting team with strategic, financial,
 management, operations, and clinical skills



                           Page 5
GBC Client-Base
                  WASHINGTON

                                                        NORTH                                                             VERMONT
                                         MONTANA                    MINNESOTA                                                       MAINE
                                                        DAKOTA
                                                                                                             MICHIGAN
                  OREGON

                               IDAHO                                          WISCONSIN                                                NEW HAMPSHIRE
                                                        SOUTH
                                                        DAKOTA
                                           WYOMING                                                                   NEW YORK          MASSACHUSETTS
                                                                                                                                       RHODE ISLAND
                                                                       IOWA                                   PENNSYLVANIA             CONNECTICUT
                      NEVADA                            NEBRASKA
                                                                                            INDIANA   OHIO                      NEW JERSEY
                                  UTAH                                           ILLINOIS
                                                                                                                                    DELAWARE
                                             COLORADO
                                                                                                           WEST                     MARYLAND
                                                           KANSAS
            CALIFORNIA                                                  MISSOURI                          VIRGINIA
                                                                                                                  VIRGINIA
                                                                                               KENTUCKY
                                                                                                          NORTH CAROLINA
                               ARIZONA                      OKLAHOMA    ARKANSAS
                                          NEW MEXICO                                    TENNESSEE
                                                                                                              SOUTH
                                                                                                             CAROLINA
                                                                                                      GEORGIA
                                                                                 MISSISSIPPI
                                                         TEXAS                              ALABAMA


                                                                            LOUISIANA
         HAWAII




                                                                                                              FL
                                                                                                                 OR
                                                                                                                   ID A
                                ALASKA


 PUERTO
  RICO




                                                                   Page 6
Selected Rehabilitation Clients
 Large Hospitals and Integrated Delivery Systems
   Grady Health System
   Catholic Health Services of Long Island
   Yale/New Haven Medical Center
   Northwestern University Medical Center
   Scott and White Health System
   Wesley Woods Geriatric Hospital/Emory Health System
   Bon Secours Health System
   North Broward Hospital District


                           Page 7
Selected Rehabilitation Hospital
Clients
 Specialty Hospitals
   Rehabilitation Institute of Chicago**
   Spaulding Rehabilitation Hospital, Boston**
   Rusk Institute, New York**
   TIRR (Texas Institute of Rehabilitation and Research**
   University of Alabama Hospital, Birmingham**
   Helen Hayes Rehabilitation Hospital, New York
   Rehabilitation Hospital of the Pacific, Honolulu
    ** Top 20 Rehabilitation Hospitals – US News and World Report


                                   Page 8
Selected Rehabilitation Clients

 California Experience
   Sharp HealthCare, San Diego
   Santa Clara Valley Medical Center, San Jose
   St. Vincent Medical Center, Los Angeles
   Eisenhower Medical Center, Rancho Mirage
   Catholic Healthcare West, San Francisco




                          Page 9
Rehabilitation Overview
 Provided as unit of acute care hospital or freestanding hospital
    Freestanding providers in close proximity to acute care beds and services
 Defined by Medicare rules of participation regardless of payor
    Admission criteria
    Intensity of services
    Medical leadership
    Nature of programming
 Requires specialized expertise in management and clinical areas
 Multiple subspecialties for more catastrophic cases
    Spinal Cord Injury (SCI)
    Brain Injury (BI)
    Pediatrics
    Other subsets
 Subspecialties supported by critical mass of patient populations
    Usually large providers – over 80 beds
    Subspecialists with expertise in caring for patients with significant chronic and
    functional impairment
    Systems of care provide services at multiple levels (inpatient, outpatient, other)
 CARF the accrediting body for general programs and each subspecialty
                                         Page 10
Project Overview
Four Key Objectives
1.   Define the strengths, weaknesses, opportunities,
     and threats surrounding Rancho’s ability to change
     from a public hospital to a competitive hospital
     authority or private not-for-profit hospital
2.   Complete a market analysis that defines the
     rehabilitation/chronic care capacity in the market
3.   Determine the impact to the overall county of caring
     for Rancho’s current population assuming the
     absence of Rancho’s existing programs
4.   Develop operating model scenarios that could pose
     viable options for Rancho to pursue in the future
                           Page 12
Rancho Strengths and Weakness
                      Analysis
Strengths
 National recognition for quality care, applied research in tertiary
 rehabilitation = high brand equity
 Consistently ranked among top 10 rehabilitation providers in the
 country – US News and World Report (only one of four LA area
 hospitals with this distinction in any specialty)
 Over 200 beds for patients with chronic conditions – highly-
 specialized core competencies
    Enough critical mass by key diagnostic category to ensure expertise
    Member of NIDRR Model Spinal Cord Injury Care System since late
    1970s (one of 16 nationwide)
    Provide primary care services to over 2,000 spinal injury patients in
    community
    Follow over 300 respirator-dependent patients in community settings
 Dedicated and clinically strong staff – physicians and non-physicians
                                  Page 14
Strengths
 Case mix index of 1.79 (national average equals 1.0)
   Indicative of high-acuity patient populations
   Requires specialty focus (medical and rehabilitation) not usually seen in
   other organizations
 Consistent with peer group (i.e., top 20 rehabilitation hospitals),
 available acute care beds supporting high-acuity focus
 Rancho acute care programs focus only on issues of chronic
 disease supportive of admission, continuity of care, and long-
 term follow-up of high-acuity, catastrophic cases
 One of few California programs with a significant number of
 subspecialty programs separately accredited by CARF
   No other “Rancho” in the market



                                  Page 15
Strengths
 Expressed desire by commercial payors for Rancho
 contracts
   Few options available to payors for quality and level of care
   provided by Rancho
 Few competitors for tertiary level care
 Teaching hospital for all medical schools in LA County
   Includes multiple specialties
   Include fellowships in endocrinology, rheumatology, and
   renal disease
 Training ground for allied health professionals from
 within and outside of California
                            Page 16
Weaknesses
 Multiple constraints imposed by county governance
   Cumbersome personnel systems
   Inability to staff based on clinical expertise needs
   Little autonomy in purchasing and contracting needs
   Unable to flex staff based on census and patient acuity




                             Page 17
Weaknesses
 No management systems in place that can:
   Identify costs
   Develop itemized billing for non-government payors
   Provide internal management information
 Senior leadership with little experience or expertise
 to manage in a competitive market place
 Lack of access to managed care contracts limit
 potential for new revenue streams
 Rancho isolated from other health system facilities
 and their medical staffs, which limits ability to:
   Change payor mix
   Capitalize on underutilized operating room space

                           Page 18
Weaknesses
 Rancho salary scales for physicians and clinicians
 below market
   Unable to develop succession plans for senior members of
   medical staff
     Most approaching retirement age
     Three to five-year time frame is needed to train new clinical leadership
     Without transfer of existing clinical expertise and commitment, costs
     could increase due to greater lengths-of-stay and/or complications
     Decrease in clinical depth could exacerbate recruitment and retention
     problems
   Current challenges exist in recruiting physicians (60 percent
   of new hires are foreign medical graduates)

                                 Page 19
Weaknesses
 Productivity levels in many areas below standards
 for like facilities
   Lack of infrastructure supportive of sound productivity
   metric
     Automation
     Standards by discipline
     Information systems
     Acuity-based staffing models
 Overall staffing levels high for like facilities
   Unusually high staffing in human resources, housekeeping,
   facilities management, security, and other non-clinical
   services

                               Page 20
Weaknesses
 No strategy in place that connects all of the service offerings
   Some mandated by the county, with no connection to core rehabilitation
   services (liver, bacterial endocarditis, etc.)
 Outpatient programs poorly organized and inefficient
   Question need for many of the current clinics
 With exception of Jacqueline Perry Building, physical plant is
 old, unattractive, and does not support efficiency in operations
   Contributes to staffing and efficiency problems
   Competitive programming will require master facility development plan
 Philanthropic opportunities limited under current structure


                                  Page 21
Weaknesses
 State-of-the-art services and programs offered by
 Rancho are essentially unavailable to the general
 population




                        Page 22
Market Analysis
2002 Overall Community
Rehabilitation Bed Need
 Presently, the overall health care market has a deficit of at
 least 150 - 200 acute rehabilitation beds
 Previous HealthSouth market analysis indicated deficit of
 300+ rehabilitation beds
                    2002 LA County Rehabilitation Bed Need

                            Potential
     Program                Admissions        Bed Need   Actual Beds
     Orthopedic                6,664              365         -
     Neurology                 4,044              291         -
     SCI                         775               69         -
     Brain Injury                807               61         -
     Other                     4,097              267         -
     Total                    16,387            1,053            881
                                    Page 24
LA Health Care Market vs. US Rehabilitation
Beds Per 100,000 Population
 This analysis is further supported by a comparison of overall
 Los Angeles community rehabilitation beds per 100,000
 population to national norms
 Projected need may increase with changes in local managed
 care trends, and revised Medicare rehabilitation criteria


                                                                  Beds
 Market                        Beds        Population (000)   100,000 Pop.
 LA Community (current)         881             9,462               9.3
 LA Community (proj. need)    1,053             9,462              11.1
 US                          33,682           277,018              12.2

                                 Page 25
Need For Specialty
Rehabilitation Services
 The Los Angeles health care market need for about
 70 SCI beds and 61 BI beds is critical, as there is
 limited access to these services currently
   Only seven of the 34 existing providers have >30 total
   rehabilitation beds in their program
   It is unlikely any of these smaller providers have sufficient
   critical mass and expertise to provide comprehensive
   spinal cord and brain injury services




                             Page 26
Los Angeles Health Care Market
Rehabilitation Provider Summary
 Only three existing providers are accredited for SCI
 services and four accredited for BI services
 These providers could not absorb the Rancho
 census of 50+ spinal cord and brain injury patients

                                           Accredited
   Bed Capacity   # of Providers     Brain Injury    SCI
   > 50 beds             1                 1          1
   30-50 beds            6                 2          1
   20-30 beds           16                1           1
   < 20 beds            11
   Total                34                4          3

                           Page 27
Rehabilitation Market Analysis

 Potential loss of Rancho rehabilitation beds would
 increase the bed deficit to 300+ beds in the Los
 Angeles health care market
   This would result in an estimated 30 percent deficit in
   beds needed by county residents




                           Page 28
Rehabilitation Market Analysis
  A 30 percent rehabilitation bed deficit in the
  community could result in:
  1.   Longer acute care stays for “at-risk” patients in the
       community
  2.   “Back-up” in the ER for patients awaiting beds and
       potential increase in ER diversion days
  3.   For patients that experience delays in rehabilitation
       treatment – an increased number of complications with
       reduction in improvement potential, resulting in increased
       costs

                              Page 29
LA County DHS Rehabilitation
Bed Need
 In addition to community need, LA County DHS hospitals
 have significant rehabilitation bed need
    Based on Rancho data, LA County DHS hospitals need access to 90+
    rehabilitation beds for their own discharges
    Actual LA County DHS rehabilitation use may be constrained by
    Rancho capacity and inability of acute care providers to accurately
    identify patients with rehabilitation potential


           LA County DHS RLA Admissions                   945
           Est. Average Daily Census                     72.5
           Est. Bed Need                                   91


                                  Page 30
Rancho Medical/Surgical Beds
 A comprehensive market analysis for acute care
 beds has not been completed
 However, access to acute care beds is critical to
 manage the high-acuity specialty populations
 admitted to Rancho
   All of the leading rehabilitation providers nationally are
   either on the campus of acute care systems, or have ready
   access to these services
 Acute care bed projections should be based on the
 long-term strategy for Rancho and its core
 rehabilitation patient populations

                           Page 31
Market Summary
 The need for the Rancho rehabilitation beds are
 evident based upon:
  1.   Community bed need projections
  2.   Comparison of Los Angeles community bed capacity to
       national benchmarks
  3.   The internal demand from LA County DHS hospitals
  4.   Insufficient bed capacity and expertise among other local
       providers to absorb the Rancho patient population




                             Page 32
Market Summary
 Because the elimination of the beds and programs
 at Rancho is not a good option for the community,
 several alternatives should be considered




                       Page 33
Regardless of option, key success
criteria for leading rehabilitation
providers include:
1.   Ability to attract and maintain high level of medical and clinical
     subspecialty expertise
2.   Over 100 beds with critical mass of between 10 and 20 dedicated beds
     in each subspecialty
3.   On-campus or immediate access to acute care and appropriate
     medical specialties
4.   Management infrastructure consistent with services provided and
     customer needs
5.   Cost efficient care – able to generate a positive contribution margin
     from operations
6.   Ability to effectively respond to community, payor, and other
     environmental needs
7.   Affiliations with medical and allied health educational institutions
8.   Access to NIDRR and other funding – well-published research
9.   Able to raise significant endowment funds for uncompensated services,
     as well as other initiates relevant to the disabled community
                                   Page 34
Options Analysis
Option Analysis
 Governance options evaluated
   County (status quo or reorganization under a LA County
   DHS hospital)
   Health Authority (actual model to be determined)
   Private, not-for-profit corporation
 Each model was assessed for:
   Governance characteristics
   Advantages and disadvantages relative to identified critical
   success factors



                            Page 36
Characteristics
County Governance
 Component of county government; accountable to
 LA Board of Supervisors
 Day-to-day operations through LA County DHS
 Infrastructure support from county departments
 Funding guaranteed by county
 Budget zeroed-out at the end of the year
 Subject to Civil Service personnel regulations
 Subject to county purchasing and contracting
 requirements

                      Page 37
Advantages
County Governance
 No loss of benefits for long-term employees
 Supported by Union
 Current structure includes Rancho in a hospital
 system that depends on it as a discharge option for
 difficult-to-place patients
 Reorganization as a unit or satellite of a LA County
 DHS acute care hospital may:
   Enhance DSH payment
   Marginally improve management efficiency


                         Page 38
Disadvantages
County Governance
 Reorganizing at existing size under a LA County DHS hospital
 offers minimal cost savings
   Downsizing threatens loss of expertise and required critical mass
 Not supportive of payors or community needs
   Payor contracting problems likely to persist
   Remains unavailable to non-indigent populations
   Continued problems in determining program mix
   Limit management’s ability to implement cost efficient practices
 Question county’s responsibility to maintain costs associated
 with maintaining “top 10” level facility
 Limits opportunity to attract external funding/donations

                                 Page 39
Characteristics
Health Authority
 Public entity distinct from county
 All authority determined by enabling legislation
 Potential to access same county funding
 mechanisms that are available to LA County
 Indigent care service delivery could be mandated
 (with financial contract with the county)
 Mandate may not limit or eliminate county
 responsibility for indigent health care
 No longer under County Civil Service
 Other, as determined by legislation

                       Page 40
Advantages
Health Authority
 While still vulnerable to political environment, allows for
 increased autonomy over county governance structure
 May have access to existing funding sources presently used to
 finance DHS, although populace approval for operating funds
 unlikely
 Improved ability to develop infrastructure without constraints of
 county system, although funding for development uncertain
 Greater ability to effectively manage resources
 Able to contract with payors directly
 Physicians able to develop independent practice model for
 recruitment and retention purposes
 Able to develop market competitive management and clinical
 staff salary structure
                               Page 41
Disadvantages
Health Authority
 Requires passage of enabling state legislation
 Boundaries of the entity’s authority and obligations outlined by law
 Health authority board may maintain political influence
 Health authority maintains greater risk for county indigent care burden
 MediCal DSH payment likely to decrease
 Offers no guarantee of funding support outside of patient-generated
 revenues
     Purchase or transfer of assets insufficient for ongoing operations
    Current entity offers neither infrastructure nor management expertise to
    operate Rancho under a more independent Health Authority
 To attract key, long-term medical/clinical leadership, must be able to
 respond to transfer of benefits for long-term Civil Service employees
 Will require new affiliation arrangements with academic institutions
 Limits potential for philanthropic giving
                                    Page 42
Characteristics
Private, Not-For-Profit Corporation
 Governed separately from the county, with final authority
 and responsibility resting with a community Board of
 Directors
 Maintains autonomy in contracting, procurement, and
 personnel decisions
 Could receive property and/or other assets from the
 county, with contingencies based on negotiations with
 County
 Population served based on Mission, Vision, and
 strategic plan
 Provisions for indigent care based on negotiations with
 county and/or initial business development plan
                          Page 43
Advantages
Private Not-For-Profit Corporation
  Board autonomy – develop and implement Mission, Vision, and strategic
  direction
  Model consistent with majority of leading rehabilitation providers
  Cleanest model for efficient and effective care delivery
  Best able to competitively recruit and maintain necessary expertise and
  ongoing medical and administrative management
  Designed to be entrepreneurial – responsive to the community needs and
  payor needs
  Able to negotiate contracts with payors and other providers, including LA
  County
  Likely to develop a Foundation to generate and manage grants and
  endowments
  Medical staff configuration dependent on Board desires and credentialing
  criteria
     Able to develop independent medical staff model
     Attractive to community physicians and surgeons
                                       Page 44
Disadvantages
Private, Not-For-Profit Corporation
  No access to county funding mechanisms, including transfers of
  funds
  MediCal DSH payment will likely decrease
  Needs for significant initial outlay of cash to support operations until
  contracts developed and cash flow generated
  Purchase or transfer of assets alone insufficient for ongoing
  operations
     Current entity offers neither an infrastructure nor the management expertise to
     operate Rancho under the NFP model
  To attract key, long-term medical/clinical leadership, must be able to
  respond to transfer of benefits for long-term Civil Service employees
  Will require new affiliation arrangements with academic institutions
                                      Page 45
Conclusions and Next Steps
Conclusions
  Rancho is a unique rehabilitation resource for the
  LA community that is nationally recognized as a
  leader in its field
  There is both a clear community need for the
  rehabilitation beds available at Rancho, as well as
  an internal need for these beds from the LA County
  DHS hospitals
  However, with the exception of the MediCal and
  indigent population, contracting barriers limit the
  access of Rancho quality services to the rest of the
  LA County community
                        Page 47
Conclusions
 The current county governance structure creates
 multiple strategic and operational weaknesses for
 Rancho
 A “do-nothing” strategy by the county risks a
 continued deterioration of Rancho services, and a
 potential departure of key clinical and medical staff




                         Page 48
Next Steps
 Before the County Board of Supervisors or any
 other constituents such as the California Community
 Foundation commit to a strategy, several key
 questions should be addressed (a summary follows)




                       Page 49
Key Strategic Questions
1.   Should the current Rancho services remain
     accessible to LA County residents, including the
     indigent and MediCal population?
     a)   If NO, then Rancho should be closed
     b)   If YES, go to Question 2




                               Page 50
Key Strategic Questions
2.   Should these services stay within the county
     governance?
     a)   If YES, no change in current structure required
     b)   If NO, go to Question 3




                              Page 51
Key Strategic Questions
3.   Should another entity assume responsibility for the
     Rancho services?
     a)   If NO, then close Rancho
     b)   If YES, go to Question 4


4.   Should the new entity be a Health Authority or a
     private not-for-profit organization?
     •    This depends upon the weight of factors previously
          presented, in addition to other political elements

                               Page 52
Key Strategic Questions
5.   Should a potential new entity obtain Rancho
     programs and assets from the county to continue
     services, or could a new rehabilitation provider be
     created de novo more cost effectively?
     •   This depends upon the ability to negotiate acquisition
         of assets from LA County




                            Page 53
Key Strategic Questions
6.   If existing Rancho campus not acquired, should a
     new replacement rehabilitation hospital be
     freestanding, or could it go on the campus of an
     existing, not-for-profit acute care hospital, thereby
     reducing the need to replace the Rancho
     medical/surgical beds?
     •   This depends upon alternative site availability and costs




                             Page 54
Next Steps
 Clearly, the first decision that must be made is by
 the LA County Board of Supervisors
 Once their decision has been reached, other parties
 must assess potential opportunities




                        Page 55
Next Steps
 Specific areas to be addressed further include:
   The scope of services Rancho should provide based upon
   community need and financial impact
      What is the market penetration strategy?
      What will be the response of other providers if Rancho takes on a
      competitive posture?
   Determination of the operational changes necessary to
   improve efficiency and cost effectiveness
   The potential costs associated with developing the
   management infrastructure necessary to the successful
   management of Rancho
   Development of a reasonable time line to achieve the
   desired goals
   Identify successful implementation strategy
                               Page 56

				
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