BSR

1
BSR SMH Childrens ServicesThe Case for
Non-Incremental Development

• HIGHLY CONFIDENTIAL
• DO NOT DISTRIBUTE

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Executive Summary

• BSRHS and SMH have made tremendous progress in
  pediatrics since 2001. However, several key
  issues remain in establishing a solid foundation
  in basic childrens services. In five years,
• (volumes)
• (percent of SMH OP revenues)
• At the same time, we have the opportunity to far
  exceed basic childrens services. External
  factors have sent subspecialty physicians our way
  who would ordinarily only be at a tertiary
  center. Successful integration of these
  physicians would
• Boost surgical volumes.
• Support related adult program growth in key BSRHS
  target service lines, e.g., cardiac, orthopedics
• Further increase acuity.
• Because subspecialty surgery is a year-round
  business, allow us to reach best practice
  pediatrics occupancy rates in excess of 70 to 80.

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Executive Summary

• The window of opportunity for us to do so is
  narrow. VCU and Childrens Hospital are making
  substantial progress toward a downtown childrens
  hospital.
• Should they succeed in their vision, there is a
  substantial likelihood that SMH will be forced
  out of the pediatric business within five to 8
  years.
• For SMH, we are at a tipping point.
• The relationship between VCU and CH is not yet
  solidified, and SMH continues to attract VCU
  subspecialists currently not within the control
  of the VCU Department of Pediatrics. If we are
  able to act on these opportunities, we may still
  solidify SMH as the leader. If we are able to act
  quickly, it is still even conceivable that the
  Richmond Childrens Hospital could end up being
  on the SMH campus, not downtown.
• We are ahead of VCU-CH (COPN), but by not more
  than nine months.
• The basic programs we are still developing
  include Peds ED, PICU, peds hospitalists and
  general pediatric care.

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Executive Summary

• The greater opportunity is to develop
  specializations in areas with higher acuity,
  challenge and rewards. The five subspecialty
  areas identified for development by PwC are
• Cardiology
• Cranial-Facial surgery (7 physicians in 5
  separate subspecialties)
• GI
• Orthopedics
• Urology
• To take advantage of development in these areas,
  we must leapfrog incremental pediatric
  development. The key areas in which we cannot
  afford to grow our own strengths are in
• Integrated tertiary, subspecialty-level
  operations
• Quality
• Medical leadership Relationships and a working
  knowledge of the needs of the more than 115
  pediatric subspecialistsand how they can be
  brought together as an integrated wholewho can
  take us to the next level.
• Philanthropy

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Executive Summary

• This presentation
• Delineates the strengths and weaknesses of
  current programs, and the opportunities presented
  by our growth and the environment
• Identifies internal and external threats
• Presents options for next steps.

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Current Situation
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Pediatrics and Neonatology

• Neonatology
• Primary customer Obstetricians
• Can exist without pediatrics, but not without OB
• Pediatrics
• Primary customer Pediatrician
• Can exist without OB (childrens hospitals)
• Most profitable inpatient service is NICUif have
  subspecialists
• Where the two meet Neonatal revenue/case
• With full service pediatrics, can attract
  subspecialists to NICU
• Without subspecialist support MRMC at 9,000 net
  revenue/case
• With subspecialist support SMH at 29,000 net
  revenue/case

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Peds Subspecialties SMH Privileges2001 16 ?
2006 115

• Allergy
• Anesthesia
• Cardiology
• Cardiac surgeon
• Dental surgeon
• Endocrine (Juvenile DM)
• Emergency Med
• ENT
• Gastrointestinal
• General surgeon
• Hem Onc
• Hospitalist

• Infectious diseases
• Intensivist
• Neonatologist
• Nephrologist
• Neurologist
• Neurosurgeon
• Orthopedics
• Plastics/Facial Surgery
• Pulmonology
• Radiology
• Urology/Spina Bifida

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Pediatric Lives Required for Minimum Peds
Subspecialty Team
Pediatric Lives
Richmond Metro Peds Lives
With a metropolitan population of 1.2M, assume
260,000 children age 14 and under in Richmond
(21.6 of general population)
SMH-loyal VCU-loyal Support SMH but financially
supported by VCU and under pressure Only at UVA
SMH
VCU
Splitter/Pressure
UVA
Source Norlin and Osborn, Pediatrics, Vol. 101
No. 4, April 1998, pp 805-812
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Example Subspecialty Limitation of Coverage as
Result of Small Teams
Source St. Francis and St. Marys medical staff
offices internal case reports.
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Richmond Pediatric Market Share Analysis
Source MedPAR data, All Virginia cases 0-14, 2004
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Richmond NICU Market Share Analysis
Source MedPAR data, All Virginia cases 0-14, 2004
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Pediatric In-Patient Surgery14 and under, FY04
FY06
14 and under chosen for conservative perspective.
Note that the increase in new subspecialty
activity (urology, plastic/reconstructive and
related subspecialties) appear to be offsetting
losses in otolaryngology in FY06..
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SMH Childrens ServicesThe Perfect Storm?

• SMH Peds
• Increased volumes
• Increased acuity
• Significant pressure on inexperienced nurses
  accompanied by unexpected leadership changes
• Increasingly obvious Operational and
  span-of-control disconnects between related
  services (e.g., Peds ED and pediatrics)
• Limitations of designated medical leadership
• No outreach
• Interest limited to own subspecialty
• Unable to start projects like transport
• Losing numbers and quality of medical staff
• Unrest in hospitalist program
• SMH generally Limited by peds ops experience at
  current operational level
• At the same time, increased utilization by peds
  subspecialists
• Inadequate ops and business development staff to
  bring together the more than 115 pediatric
  subspecialists, 22 types, in more than 70
  practices.
• We can market to consumers it takes a
  physicians credibility to market subspecialty
  care to pediatricians and to bring together those
  disparate needs

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Current Situation External

• VCU-Childrens Hospital project
• First phase COPN initiated (parking deck) June
  2006
• City relationship
• Part of 1B Richmond-VCU master plan (see
  appendix)

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Current Situation External

• VCU
• Pulling financial support of peds subspecialists
  not currently in Dept. of Peds to obtain VCU
  compliance
• JV plan Built on shutting down SMH peds and NICU
  volumes
• Childrens Hospital
• Disagree with VCU Combined board, philanthropy
• Reluctant to hand over endowment current deal as
  building developer only
• Nervous about VCU OB and peds volumes
  decreasing, not growing and needed for NICU,
  residency
• KSA House of cards
• CH board Lack of trust evident in all actions.
  Very little to pull rug out.

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SWOT Analysis
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SMH Strengths

• Despite lack of operational and medical
  leadership, growth continues.
• Even with growing pains, support and loyalty
  among pediatricians and pediatric subspecialists
  continues to increase.
• Even after VCU-CH announcement, 117 board
  members, BSR execs, community leaders/donors,
  physicians (55) and other stakeholders told PwC
  SMH should go ahead and develop pediatrics.
• Subspecialty support at SMH is the basis for the
  significant contribution of NICU services as
  compared to hospitals without subspecialty
  support.

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SMH Strengths

• PwC
• Womens and Childrens Services at SMH currently
  10.5M operating income
• Pediatrics alone
• 20 of SMH contribution margin
• 25 of SMH net outpatient income.

Sources PwC reports BSRHS Finance
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PwC Moderate Scenario

• In addition to baseline
• 3.5 additional market subspecialty market share
  state-wide
• Addition of BSRHS peds medical executive
• Strategic programmatic growth in areas of already
  existing peds subspecialty medical staff
  strengths
• Cranial Facial program, including pediatric
  plastics, dentistry, ENT and otolaryngology
• Peds cardiology
• Gastrointestinal
• Orthopedics
• Urology and associated spinal bifida, including
  related neurology and neurosurgery
• Addition of programs with significant regional
  and local unmet need Endocrinology, including
  childhood obesity and juvenile diabetes
• Support of peds radiology and anesthesia to
  support 24/7 dedicated peds availability
• NICU, PICU and general pediatrics and related
  outpatient services expand as a result of
  increased subspecialty availability
• Total project cost of 68M

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PwC Analysis Childrens Pavilion Income
Statement Summary Moderate Initiative
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PwC Analysis Incremental Income Statement
Summary Moderate Initiative
Note Incremental growth is calculated from the
base year
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Weaknesses

• Lack of vision Someone who has done this
  beforecreated a childrens hospital and/or
  complex childrens services at this level
• Lack of operational experience at this level in
  pediatrics
• Growing pains as a result of increased volumes
  and increased acuity, and as related to lack of
  operational experience quality concerns
• Lack of medical leadership
• To bring multiple subspecialists together into a
  cohesive whole
• Academic credibility needed to work successfully
  with subspecialists, and to create win/win with
  academic centers where subspecialists will always
  have a base
• Lack of experience needed to successfully tap
  into philanthropy

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Opportunities

• We are nine critical months ahead of VCU
• Secure loyalty of subspecialists while VCU is
  still trying to control thembefore VCU does
  control them.
• Target the 80 occupancies tied to subspecialty
  business, which is not seasonal. No on in the
  city has captured this market even VCUs
  business is seasonalevidence they are unable to
  capture the subspecialty market.
• Leverage targeted subspecialties to help build
  strategic programs in adult medicine cardiac,
  ortho, neuro and neurosurgery, surgery, cancer.
• Pull out the bottom card from the house of cards
  bring Childrens Hospital and their endowment
  here
• Ultimately, have the Richmond Childrens Hospital
  at SMH, with the academic centers needing us, not
  the other way around.
• By doing so,
• Secure the future of pediatrics at SMHa core
  mission of the Sisters.
• Secure the revenues of NICU (continued
  subspecialty support at SMH)
• Create halo effect for SMH Niche for the future

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Threats

• Becoming preoccupied with financial barriers to a
  new building, while not exploiting the
  opportunities of developing people, programs and
  processes.

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Threats

• Continuing to tease physicians, who believe we
  are going to do some something
• Continuing to irritate the philanthropic
  communitythose loyal to both entities, who are
  worried about a conflict
• Loss of opportunity for childrens philanthropy
  as basis for funding of new building
• Loss of COPN without substantive progress on new
  building
• Should VCU succeed
• Loss of peds at SMH
• Loss of potential SMH halo for future
• Loss of high revenue NICU cases at SMH

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Threats

• Continuing inaction. We have three choices
• Build the service
• Do nothing
• Cease the service
• Right now we are at 2, which is a slower, more
  painful version of 3.

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Threats
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Time for Some Paine

• Thomas Paine, Founding Father, patriot, dreamer
  (17371809)
• Lead, follow or get out of the way.

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(No Transcript)
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Options
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The Gaps

• Vision
• Operations
• Quality
• Medical Leadership
• Philanthropy

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Option 1 Incremental Growth

• Incremental growth. Enhancement needed
• Creating the vision continued consultant
  leadership
• Operations Start filling in in- and out-patient
  pediatric operations experience at both the basic
  and subspecialty levels
• New nursing AD already starting to do
• Quality Determine a method of handling RCAs on a
  service line level, not at the departmental level
  
• Medical leadership
• Continue the search for a medical director for
  pediatric ED.
• Attempt to attract get one magnet physician
• Nationally known
• Academically credible (to attract subspecialists
  and negotiate with academic centers)
• Philanthropy Develop childrens subspecialty
  within BSR philanthropy.

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Incremental Growth Challenges

• Vision At some point, we need someone to carry
  it here who can answer the questionsincluding
  those our consultants dont know the answers to.
• Operations Would be bolstered substantially by
  someone who understood running pediatric
  subspecialty practices and how they all work
  together, and by strong medical leadership in a
  collaborative role with nursing.
• Quality Must be taken on through multiple
  specialties and departments. Recent RCAs involved
  ED, radiology, and PICU. While peds
  subspecialists from all departments were
  involved, the fixes remained at the
  departmental levels. No one is in a position to
  hold all accountable for working together.
• Philanthropy

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Incremental Growth Challenges

• Medical leadership
• Have been recruiting for a peds ED medical
  director for 18 months without success.
• Pediatricians, with rare exceptions, are a
  subset of medicine, not surgery true leadership
  is hard to find.
• Experience pulling together multiple
  subspecialties even more rare most commonly only
  found at level of departmental chairman.
• Medical directorships
• Need at least 22 (22 x 35,000 770,000 (but we
  already have two medical directorships that,
  together, are gt1M. No guarantee medical
  directorships will stay anywhere near 35,000. )
• Pediatric subspecialists poorly reimbursed.
  Struggling for a living, no time to go out on
  philanthropy visitskey role in childrens fund
  raising.
• Subspecialists can only be marketed by
  physiciansand if we get one in one subspecialty,
  they ignore others to whom they dont relate.
• Academic credibility will be critical to get us
  to win/win with the academic centers, not
  lose/win.
• Level required that of history of full
  professorship nothing else will get their
  attention

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The Argument Against Incremental Growth

• Were too far behind, the next level up is too
  complex for our current skill levels, and the
  window of opportunity is too narrow.

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Option 2 Find Experienced Ops, Team with a
Part-Time Medical Director

• Vision Consultants
• Operations
• Bring in an experienced childrens services VP
  (MHA or MBA) will need to be at this level to
  cross multiple departments, hospital-wide, and
  deal with multiple physician leaders (e.g.,
  radiology, anesthesia)
• Position can later become EVP of childrens
  hospital/pavilion
• Continue to build nursing strengths consider
  reporting to this VP
• Quality
• Hire consultants to assist us in dealing with
  interdepartmental nature of issue
• Bring quality initiatives under purvey of new VP
• Medical leadership
• Find part-time medical director who can,
  one-on-one, handle the physician issues and
  participate in fund-raising. Must be academically
  credentialed and knowledgeable about/able to pull
  together multiples subspecialties. Magnet
  status required to attract rainmakers. If
  authoritative in quality, can take lead quality
  initiatives.
• Philanthropy Same as with Option 1develop
  within BSR Foundation as a specialty

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Option 3 Find Qualified Medical Director, Team
with Generalist in Ops

• The obverse of Option 2 The pediatric experience
  is on the part of the medical director, not the
  operations person

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The Common Thread Still Need a Physician Leader

• Magnet for other rainmaker physicians
• Knowledgeable about subspecialties Can put the
  pieces together
• 115 subspecialists in (already) 22 different
  types of subspecialties need that many and more
• Able to stand toe-to-toe with physicians in
  difficult situations (think radiology)
• Academic credibility
• Subspecialists are always academically-affiliated
• Negotiations
• Lead quality across multiple departments, with
  medicine and nursing

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Timeframe Recruit for Medical Leader
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Discussion

• The issues
• Vision
• Operations
• Quality
• Medical leadership
• Philanthropy
• Nine month lead.

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Appendices
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Key Events, SMH Pediatrics
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Bed Summary Current and Initiatives
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Virginia BioTech Research Parkand VCU Medical
Center
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Virginia BioTech Research Parkand VCU Medical
Center

• RTD Articles
• Medical Center Builds on Past, Plans for Future
  (6-4-06)
• Growing a Health-Care Center (6-4-06)
• Childrens Hospital in Works for Downtown
  (11-30-06)
• VCUs Growing Footprint (11-20-05)
• New Life, and Faces, in Carver (11-20-05)
• Making its Mark VCU Expands Downtown (11-2005)
• VCUs Expansion on West Broad (11-5-05)
• 20 Major Projects to Change Face of Downtown
  (9-11-05)

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Virginia BioTech Research Parkand VCU Medical
Center
Interactive map http//media.gatewayva.com/rtd/mu
ltimedia/Downtown/index.htm Video
tour mms//wmvod.mgnetwork.com/vod/rtd/VCUHealth.
wmv
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Virginia BioTech Research Parkand VCU Medical
Center
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Virginia BioTech Research Parkand VCU Medical
Center