Schafer: North Memorial scrambles as reform upends health care

North Memorial Health Care would make anyone's list of candidates to get merged out of independent existence as the industry consolidation kicked off by health care reform continues.

While North Memorial is a big care provider in the northwest metropolitan area, with consolidated revenue of $544 million through the first nine months of 2012, that still makes it a small player in an industry that sees clear benefits to greater size and scale.

Waiting around for a merger proposal, of course, isn't an executive's job.

So it's promising to see Robbinsdale-based North Memorial move with urgency in an ongoing effort to remake itself as an integrated care system rather than a hospital company that happens to have clinics. Whether or not a merger ever materializes, moving quicker down that path is the right direction to lead this business.

In a conversation with two North Memorial executives last week, they acknowledged risks but said their plans are for North Memorial to be around a long time.

North Memorial is rolling out a new strategic plan to its employees. An e-mail from the CEO in December said in black-and-white that implementing it will mean reducing staff at the big North Memorial Medical Center in Robbinsdale. Yet the change is really more fundamental than simply cutting costs.

"It's a very distinct shift, to growing and focusing our organizational energy outside of the walls of our hospital," said Gayle Mattson, president of North Memorial Medical Center.

While no staff positions have been eliminated yet, it's clear that layoffs are coming at the Robbinsdale campus, starting with positions that are not dependent upon patient volume. Meanwhile, North Memorial added 15 new primary care physicians in 2012 and plans to add 15 more in 2013, and Mattson described plans to build its capability in speciality areas like integrated care for elderly patients.

"We've changed because we had to," said J. Kevin Croston, the system's chief medical officer and president of its physician organization. "The way to provide care that is most cost-efficient is to not let people get admitted to the hospital."

The model Croston and Mattson talked about is called a clinically integrated organization, and they attribute part of the energy behind its implementation to the federal Affordable Care Act.

Health care reform, a law mostly about health insurance, proved to be a catalyst in the shift in the market now underway, from paying providers for procedures performed or patients admitted, to paying for the overall health outcomes of a given population.

To manage health outcomes well, any health care services organization needs to provide seamless care for the patient, with specialists working with dieticians who are working with a patient's primary doctor -- even if their paychecks come from different companies.

Croston argued that a shared risk/reward model, as each party holds the other accountable, can create just as much efficiency as when everybody has the same boss -- provided they share a common patient record system, treatment protocols and other tools.

"We will partner with anyone who smiles at us," he said, "but we have not consolidated with anybody."

In assessing the North Memorial network, Croston put it this way: "Would we like more outpatient presence? Absolutely. In my dreams we would have double the outpatient presence. But we have what we have, and we are trying to grow it where we can."

It's important to point out that growing the network of clinics and knitting together the entire system to share data and coordinate patient care are merely conventional strategies in 2013. And North Memorial is playing catch-up.

"HealthPartners, Allina and Fairview are probably much further ahead of North Memorial in developing the rings and rings of primary care and specialty practices that are related to the hubs of their various hospitals," said Allan Baumgarten, a St. Louis Park health care analyst and consultant.

But what's important here is that by making the new model work, North Memorial has a way to stay alive into the next round of the tournament.