Nelson: Clinical improvements hold key to reducing cost pressures - Executive Insights - Interview with William H. Nelson, president of Intermountain Health Care - Interview

Healthcare Financial Management, April, 2002

William H. Nelson, MBA, is president of Intermountain Health Care (IHC), an integrated delivery system that includes 22 hospitals, a physician division, and IHC Health Plans, the largest managed care organization in Utah. IHC was selected as the official provider for the 2002 Winter Olympic Games held in Salt Lake City.

Prior to his current position, Nelson served as executive vice President of Intermountain Health Care. He is a member of HFMA's Utah Chapter.

HFM: Please describe Intermountain Health Care (IHC) and your responsibilities in the organization.

Nelson: IHC is a system consisting of three elements: 22 hospitals, the health plan, and a physician division, which employs about 400 physicians with an additional 2,000 nonemployee affiliated physicians. IHC Health Plans insure about 500,000 lives in the state of Utah and provide about 25 percent of our hospital admissions.

My most significant responsibility is to strategically position fl-IC to ensure excellence of service to those who depend upon us. Reporting to me, among others, are the person responsible for all of our medical delivery services, the person responsible for our financial management, health plans, and information systems, and the person responsible for our strategic planning. Additionally, human resources, public relations, community activities, and legal affairs report to me.

HFM: What is IHC's service area and patient mix? What percentage of IHC's patients are members of the health plan?

Nelson: The service area basically covers the entire state of Utah and a portion of southeastern Idaho. As for our patient mix, Medicare makes up about 33 percent of the mix, Medicaid is about 10 percent, charity and private pay constitute about 10 percent, and the rest is commercial insurance. About half our commercial insurance population is enrolled in IHC Health Plans, and the rest come from other managed care organizations with which we contract.

HFM: Do you face any special challenges in your service region?

Nelson: Because we are the largest insurer in our region, we are often a lightning rod for physician concerns, particularly regarding payment. When the Federal government reduces payments from Medicare and that is picked up in the commercial health insurance market, physicians tend to blame us for the fee schedules not being what they would like them to be. They do not clearly understand the dynamics of the commercial and managed health insurance marketplace.

HFM: How do you meet this challenge?

Nelson: It is a tough, ongoing process. As a system, we have small group meetings with physician leaders and physician groups to explain the realities of the marketplace, attempting to help them understand the dynamics at work.

HFM: IHC Health Plans' administrative costs have decreased steadily as a percentage of insurance premiums, from 15.1 percent in 1996 to 10.6 percent in 2001. How were you able to decrease costs so significantly?

Nelson: There is no magic bullet. We simply watch costs, trimming where we can, and tightly manage, trying to be as efficient and effective as possible. We cannot attribute our success to a specific action, such as bringing in a new system, changing a contract that made things significantly better, or increasing premiums dramatically to decrease, the cost percentage. It is just continuing to tighten all the bolts on the machine.

HFM: How are you able to keep IHC Health Plans' premiums competitive during a time of cost pressures due, in part, to rising pharmacy costs and medical inflation?

Nelson: Keeping competitive is like the tide that raises all the boats. All health plans are experiencing the same types of currents and facing the same types of trends. We at IHC believe one of our competitive strengths is our integration and our focus on clinical processes and clinical quality improvement. Based on my travel around the country and a review of recent studies, I believe that we may be one of the few organizations nationally that can demonstrate that improving clinical processes and clinical quality has resulted in lower costs.

HFM: Can you elaborate on your best medical practices initiative and how it has impacted quality of care as well as the cost of care being provided?

Nelson: About eight years ago, we began to focus on clinical process improvement in a very significant way. We began by carefully evaluating all of the clinical processes and programs in our system. We did a Pareto analysis and defined the most critical clinical programs and processes. We brought together physicians, nurses, and other caregivers to select specific care processes and look at how we could improve them and reduce variation in treatment.

We identified heart, women's and newborn, and primary care services as three clinical programs of focus. Some of the initial measures we implemented were very simple. For example, it was known that if a patient had a heart attack or heart surgery, specific medications were needed when he or she left the hospital. This was not new knowledge. But we did discover that less than 50 percent of patients discharged nationally--and about 60 percent of our patients--were being discharged without those medications. Therefore, we developed processes to ensure those medications were being prescribed and given to these patients. Now, well in excess of 90 percent of the patients leaving our heart services have the correct medications and are taking them. As a result, we believe we save about 500 lives each year. We also have fewer readmissions to the hospital, because many potential problems are eliminated when people are on the correct medications.