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Hospital Metropolitan Authorities: A new business model for hospitals.


Hospital Metropolitan Authorities: A new business model for hospitals. S. T. Parente, Ph.D. Finance, Carlson School of Management February, 2006 – PowerPoint PPT presentation

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Title: Hospital Metropolitan Authorities: A new business model for hospitals.

Hospital Metropolitan Authorities A new
business model for hospitals.
  • S. T. Parente, Ph.D.
  • Finance, Carlson School of Management
  • February, 2006

A Citizens Checklist for 21st Century Hospital
  • Get best care possible.
  • But what does that mean?
  • Best care The best outcomes (short and long
    terms) for me to live with given my condition.
  • Possible Nice word for limits, budgets, extend
    of knowledge, distance from hospitals.
  • More importantly, how does the citizen (or you)
  • Want a personalized Zagets for Health care.
  • But have limited to no scientific data.

Current State of the Hospital World
  • Decade of significant vertical and horizontal
  • Lower reimbursement by public private insurers
    with little hope of rebound
  • Reduced credit ratings due to over-investment
  • Significant competition for new starts
  • Little to no quality of care information to
    citizens because little payoff from Health IT

Health IT in a General Hospital
Major IT Systems
Whats Wrong With Todays Health IT Picture? TOO
10 of Care
25 of Care
15 of Care
15 of Care
35 of Care
Data Available to the Average Medical Provider
About a Patients Care
Actual eLinks
To Build for Interoperability
Main Street
Federal Government
lt90 Income
Big Business
99 Income
91-99 Income
Is Government Intervention Required?
  • Is there a market failure?
  • Questions (economist/policy makers) ask?
  • Insufficient flow of information for informed
    purchases in a competitive market.
  • Insufficient access to a good or service of
    critical societal value (e.g., roads, clean
  • Insufficient competition to get the best price
    for the quality of a good or service.
  • Maybe there is a case given
  • No information on prices (before service).
  • Little to no information on quality of service.

Hospital Metropolitan Authority
  • What it is
  • Holding company, in the form of a Hospital
    Metropolitan Authority (HMA) builds a hospital
    facility to serve a metro area need (e.g., the
    Twin Cities burgeoning Maple Grove area)
  • Idea borrowed from Metropolitan Airport
    Commission (MAC) governing use of the Lindbergh
    terminal in the Twin Cities.
  • HMA provides physical plant, electronic medical
    record connectivity, and facility safety/standard

Hospital Metropolitan Authority
  • What it does
  • The HMA auctions off exclusive specialized
    hospital service contracts that are
  • Renewable
  • Based on financial and clinical performance
  • Clinical performance benchmarks determined in as
    real time as possible through use of EMR
    technology and comparison to national best
  • Contracts include
  • Medical (e.g., cardiology, ENT)
  • Surgical (e.g., general surgery, ortho)
  • Urgent/emergency care
  • Ob/GYN
  • Psych services

Hospital Metropolitan Authority
  • Rationale
  • Competition in hospital services is nearly
  • Current bond status of hospitals cannot sustain
    robust growth to meet the needs of the baby boom
  • Promotes the development of a lean design of
    hospitals and allows medical units to compete on
    what they do for their patients, rather than
    simply their revenue making ability.

Hospital Metropolitan Authority
  • Why 2006?
  • The continuation of sprawl in major American
    cities will contribute to hospital building boom
    that will not be affordable under current
  • Property building and management companies have
    matured and specialized significantly in the last
    30 years to take on this new role.
  • Electronic medical records may finally be at a
    tipping point for wide spread use for comparative
    clinical performance, not just adoption.
  • HMAs guarantee EMR adoption and performance
    standard, the status quo world looks considerably
    bleaker given that some hospitals are resorting
    to taking out cripling financing to buy their
    EMRs will little serious prospect of
    institutional ROI. Departmental or specialty ROI
    looks much more doable.

The Maple Grove Opportunity
  • Current trajectory is for one of three hospital
    chains to be awarded a 200 bed hospital in Maple
  • Build 100 bed hospital owned by 1 of the 3
    systems/consortiums to tackle immediate urgent
    care OB/GYN needs.
  • Build a 100-150 bed HMA that handles the rest of
    the specialized services.
  • State of MN uses its moratorium authority to
    auction off 5 2 year contracts to hospitals
    to provide specialized services.

What Maple Grove Would Look Like
  • 100 Bed North/Allina/Fairview hospital with OB
    and urgent care.
  • The 120 Bed HMA Hospital with
  • Cardiology Park Nicollet
  • Psychiatry Fairview
  • Surgery Mayo
  • ENT Allina
  • Orthopedic surgery North
  • Behavioral Health Ridgeview
  • Emergency room/trauma - HCMC

What does the 21st Century citizen get with an
  • Guaranteed, verified, near real-time metrics for
    clinical performance.
  • Health providers all using one method for
    measuring quality and reducing errors.
  • An independent assessment of quality that that
    drive competition (because a world of oligopoly
    payers and providers will not).
  • The contracting incentive for hospitals providers
    to improve their quality of care AND their
    revenue share.

What does the 21st Century citizen get withOUT an
  • Federal web sites to compare hospital mortality
    for Medicare patients 2 years ago.
  • Health providers using different methods to
    measure quality.
  • A summary of statistics provided by hospitals
    that will not be easily comparable or verified.
  • No performance incentive on quality for future
    hospital expansion. Expansions will occur as
    licenses without expiration dates.

Next Maple Groves Important to get this Right -
  • New Prague
  • Lake Elmo
  • Apple Valley
  • Hastings

Model Could Generalize Nationally Globally
  • US Western cities expansion
  • Florida California Growth
  • Northeast aging sprawl
  • Southeast US growth
  • Similar Global models (already)
  • Dubai
  • Medical tourism to multi-institution firms

Questions Comments?
  • E-mail me at
  • 612-624-1391