The Socioeconomic Impact of Disruptive Healthcare on Rural Communities

This missive attempts to address the following issues pertaining to the potential ramifications of the transformation of rural health from a cost-plus fee for service model to a value-based, consumer driven healthcare model:

  • Employment: It is not unusual that the local hospital is the largest or second largest employer in a rural county or community. As such, the rural hospital is a dependable source of employment providing reasonably good jobs with good benefits. Healthcare employment is general not dependent upon ebbs and flows in the economy. Healthcare is a good community asset providing economic benefit through out the community and is an integral part of any economic development plan. The community is wary of any change in a healthcare system that would jeopardize local employment.
  • Risk Aversion: The local hospital is a public asset. The board of trustees and the administration is charged with maintaining that public asset. Consequently, emphasis is placed on maintaining the status quo rather than innovation that could provide a brighter future.
  • Stranded Capital: Changes in the way healthcare is delivered may make the existing hospital obsolete. The community may have invested considerable resources in renovating, adding to or replacing legacy facilities. That investment and the obligations created through loans or bonds may represent of significant community burden unless an avenue is found to earn revenue in a new model.
  • Trust: The public has long held the belief that the medical profession will do what is best for them. For the most part, that trust has been well placed. Unfortunately, the trend has been to remove that decision making interaction from the physician and vesting it in third party payers. This has left the public less trustful of the medical profession and fearful of a faceless system that controls their lives.
  • Leadership: Under the above listed circumstances, finding leadership to shepherd the process of transition with decisive but incremental steps to a well defined outcome is difficult but vital to success.


The above listed traits place the local community health system if a vulnerable position relative to disruptive influences. There are those that see an opportunity to profit from providing high quality low cost medical care without the regulatory burden and trappings of a medical model that is becoming obsolete. Once that trend begins, it will be impossible to stop it. It is better to be a participant in the new model than a victim of it

The first priority is the acceptance of inevitable change in the way that healthcare is provided in rural America. The normal human reaction to impending change in any culture is to deny that change is necessary. In the case of rural health, this position is augmented by the argument that rural health delivers quality healthcare at a lower cost than competing urban systems. In many cases, this is true. However, excelling in performance in a system that is dysfunctional and economically unsustainable is not a virtue.

That being said, the issues stated above are real and if not addressed in a reasonable manner, will create strong emotional resistance to a long-term rural health solution.

It is therefore recommended that the following approach be taken to alleviate anxiety, address cultural concerns and address financial considerations:

  • Creation of a for-profit wellness district with a three-part ownership. The proposed three owners to be the local physician group or groups, the local business community and the local hospital. The ownership positions are not necessarily equal. The local hospital or hospitals are most likely not-for-profit, county-owned or community-owned entities. Therefore, legal structure must be put in place to allow a not-for-profit entity to be a participant in a for-profit enterprise.

The advantage of this arrangement is that it allows the local hospital or hospitals to maintain their critical access hospital designation without disruption while simultaneously transitioning to a low volume, value-based model.

  • Proceeds from the wellness district can be used to repay outstanding bond or loan obligations. The Wellness District itself, as a for-profit entity, would pay taxes to the county and become an asset rather than a potential public burden. Keep in mind that the cost of capital to design and build a hospital represents only approximately 9% of total costs over a twenty-five year life of the facility. Under these circumstances, the increase of functional efficiency on the operations side of the ledger can offset the repayment of capital expenditures.
  • In the employment arena, the potential of negative impact on employees is greatest among those that do not provide direct patient care in the CAH system. By running parallel models, those persons providing collection services, reporting, responding to government regulations and negotiating with third party payers would be absorbed into the new market-based system over a period of time and with new responsibilities. Through the reduction of systemic waste and duplication, the opportunity exists to provide an increased number of jobs directly impacting the wellbeing of patients and the community.
  • Healthcare in general is one of the most risk-adverse industries in world. Rural health takes risk aversion to another level. Very few members of the board of trustees, the administration or the staff are willing to try anything new or innovative. They see the risk as being far greater than the reward. While the most efficient method of transitioning to a new system is to move quickly, the reality is that the healthcare industry shudders at the thought taking a leap of faith. Therefore, others must go first, take the risk and then they will follow when they determine change is in their best interest. In this case, we must create an alternative, show that it will be successful and allow the transition to occur without being confrontational.
  • Leadership with an unwavering commitment to a vision of the future is paramount for the success of any enterprise. This is particularly true of the transformation of healthcare.   As with most other endeavors, leadership coalesces around the value stream. In a direct-care model, patient revenue enters the system through attribution to the most often seen physician. The physician is in a position make medical judgements in conjunction with the patient’s wishes. It would follow that the physician plays the starring role.
  • Trust is easy to talk about but difficult to attain. Trust is achieved through consistent competence and integrity. The public will support and maintain loyalty with an organization that gains their trust.

In summary, I believe that there is an acceptable method of transitioning from the current unsustainable public system of rural health to a dynamic, agile self-sustaining rural health system that delivers high quality at the lowest possible cost. This document offers a pathway to aid that transition. It is recommended that the local providers embrace the inevitable changes that are occurring and in doing so secure a bright future for rural healthcare.


“Never change things by fighting existing reality. To change something, build a new model that makes the old model obsolete.” Albert Einstein

Hospital or Life Enhancement Center?

“Whether it be [sic] the sweeping eagle in his flight, or the open apple-blossom, the toiling work-horse [sic], the blithe swan, the branching oak, the winding stream at its base, the drifting clouds, over all the coursing sun, form ever follows function, and this is the law. Where function does not change, form does not change. The granite rocks, the ever-brooding hills remain for ages; the lightning lives, comes into shape, and dies in a twinkling.

It is the pervading law of all things organic and inorganic, of all things physical and metaphysical, of all things human and all things superhuman, of all true manifestations of the head, of the heart, of the soul, that the life is recognizable in its expression, that form ever follows function. This is the law.[1]

pink sunrise

“Pink Sunrise” Photo by Mandy Kottas from office, March, 2014 

A brief history of hospitals

The ancient Greek civilization believed that the Gods taught the art of healing to Aesculapius, a son of Apollo. Temples built to worship Aesculapius contained areas for the afflicted to sleep. Snakes were set free in these rooms during the night. In the morning, the patients were asked to relate their dreams to the priest who recommended treatments to rebalance their systems. This is the origin of the “staff of Aesculapius” the symbol of modern medicine. The Romans carried on the traditions of the Greeks but added “valetudinarian”, military hospitals for the legions. The floor plans of these hospitals showed patient rooms arranged around central treatment areas. Each patient room had sanitation facilities located on the corridor side connected to flowing sewers. Over time the healing arts became associated with the Christian faith. Following the fall of the Eastern Roman Empire (Byzantine Empire), Persian and Arabic health evolved from the knowledge of the Roman physicians. The word “Maristan” sometimes used to describe the modern hospital stems from the Persian word “bimaristan” meaning “a place for the sick”. Simultaneously, in Egypt the Arabic word “mustashfa” was substituted, meaning “a place where health is sought”. We are still pondering that distinction today.

During the Victorian era when it was discovered that germs caused infections, hospital were built in an early version of the pavilion style. Separate structures for each aliment were connected by enclosed walkways. The concept was that air could circulate between the structures and blow away the germs. If a nasty germ threatened future patients in a particular building, that structure was burned to the ground and a new one built in its place.

Following World War II, the United States had outgrown its existing healthcare facilities and little money was available for new facilities. The solution offered by the government (referred to as the Hill-Burton Act) was that the federal government would put up one-third of the cost of a new hospital if the state and local authorities would each put up one third. The Act proposed a system of hospitals based on a selection of standard hospital plans that were often adapted to a particular site. (Historical information is condensed from “The Fourth Factor, A Historical Perspective on Architecture and Medicine, by John Michael Currie, AIA, FRSH) [2] As a general rule, each was designed and built as a smaller version of a larger urban hospital and contained the same contingent of departments arranged in silos of care that required the patients to move from department to department where staff would provide diagnostic or treatment services. Many of those hospitals have been renovated or replaced, but have retained the same basic functions and operational patterns. Hospitals were designed and built to reflect the reimbursement formulas of the Centers for Medicare and Medicaid Services (CMS). Hospitals built whatever CMS paid for and the more CMS paid, the more the medical system provided. The advent of the Critical Access Hospitals (CAH) created a formula that, in many ways, discouraged efficiency since reimbursement was based on cost of service. Form has followed function.

The case for functional change

The evolutions of fee-for-service payment systems and the subsequent warping of the basic relationship between the physician and the patient have led us to a healthcare system that overcharges and underperforms. Healthcare is changing the way that it functions. Healthcare in the United States is moving away from a high cost/low quality fee-for-service model to a value-based system where payment is based on improved patient outcomes. Just as the form of hospitals changed in profound ways following the discovery of germs and microbes, healthcare facilities planned, designed and repurposed today must conform to the new reality of a changed healthcare delivery model.

As a society, we must design and build “mustashfas,” places where health is sought, rather than a place for the sick. Healthcare must seek out the patient as opposed to requiring that the patient come to the provider. Providers will no longer be paid on the basis of the number of office visits or services administered. Physicians may need only half as many exam rooms and hospitals may refer patients to the former competitors if they can provide care of higher quality at a lower cost. This is a different philosophy encompassing the meaning and purpose of healthcare going forward.

“The future of the hospital can’t be the building on the corner or down the street. It’s got to be immersed in the daily culture of the community that it serves.” John Bluford, CEO of Truman Medical Center.

It follows then that if we are to change the function of our healthcare system, we must also examine how healthcare facilities are planned and designed. To continue to renovate and build healthcare facilities in a manner that mimics an unsustainable system will put unnecessary cost and inefficiency into a system that thrives on value and positive health outcomes.

The new model

There are currently approximately 1,328 CAHs spread across the United States, although that number is shrinking every day. It is impractical to assume that either the will or resources are available to repurpose, renovate or replace that volume of capital investment in the near future. It is, however, reasonable to view planning activities and future investments through the lens of a value-based delivery model. In keeping with previous articles, I believe that strategic planning for rural and community hospitals should focus on the implementation of a sustainable value-based healthcare service model.

direct care model graphic

A life enhancement center (LEC) is a new, renovated or repurposed healthcare facility that is designed and constructed to address the needs of the citizens within the service area of the facility. In a value-based compensation model, medical services provided must meet the test of being the highest quality (based on positive patient outcomes) at the lowest cost to the system. In keeping with a value-based model, the facility must meet both the short term needs of the customers through collaboration with integrated practice units (IPU)s, outpatient care and urgent care needs; but also the long term need to improve the lives of the population served through patient-centered medical homes and wellness programs. The physical attributes of an LEC will vary greatly, but should closely track community needs as opposed to the fee-for-service reimbursement models of the past. A life enhancement center may or may not be classified as a hospital for regulatory purposes depending on specific regulatory definitions.   A life enhancement center may include the following elements:

  • Wellness/rehabilitation A wellness center can become a social magnet for the people within the general area. It also identifies the life enhancement center as a place that supports a healthy lifestyle. Other public organizations, educational systems and private employers should become partners in supporting a program that promotes healthy activities. Recognize that in a value-based environment, physicians are rewarded for keeping their patients healthy. Health coaches and wearable electronic devices will play an active role in monitoring physical health.
  • Nutritional services. Nutritional services create an opportunity to refocus the dietary department to become a community-wide nutrition resource. The dietary department should become part of an outreach program to provide nutritional education and coaching for those who would benefit from high quality, easily prepared meals or specialty meals for those struggling with chronic illnesses. Quality foods and proper preparation play an integral role in the services of patient care coordinators and other related community support organizations.

A farmers market, featuring locally grown meats, fruits and vegetables could be held on the facility campus. This farmers market could become a source for nutritious food stock for the life enhancement center and could reinforce the commitment to good health by the organization.

  • Patient-centered medical homes (PCMH). Patient-centered medical home concepts have struggled in fee-for-service reimbursement systems. They will flourish in value-based direct-care models. At the nerve center of a quality PCMH are qualified physicians or non-physician providers who act as the patient care coordinators for the practice. This person, or persons depending on the number of providers, is generally located at the heart of the practice. The patient care coordinator must act as the patient advocate receiving information from the field and determining the correct response. The mobile care provider in the field will report directly to the patient care coordinator. The mobile care provider or “Angel” will act as the eyes and ears of the care coordinator and also of the physician. The patient care coordinators will become the field marshals of the organization, bringing the proper resources to bear to elevate the health of the people in the wellness district. Since care will be provided as close to the patient as is practical, the PCMH will need fewer exam rooms. The physicians will focus their time and attention on those individuals that will most benefit from their involvement and to coordinate the involvement of the integrated practice units (IPUs). The clinic would have flexible group classrooms to efficiently provide information to the public on such topics as diabetes, birthing or other subjects of common interest. The rooms would be flexible enough to adjust to anything from nutritional training to group exercise. Conference rooms would be available for care planning teams and individual work spaces available for team members to focus on patient support services such as mobile care coordination. Some of the exam rooms will be designated as quick turnaround rooms for phlebotomy, vaccinations or observation and one or more rooms may be designed to accommodate bariatric patients.
  • Emergency, urgent care and nursing services. Life enhancement centers should have, with rare exceptions, a strong, well-equipped emergency services function capable of handling all but the most intense trauma conditions. Low volume and limited access to specialists in remote locations demand creative technical solutions to address the needs of high quality emergency care. A high speed connection to a teletrauma services provider associated with a regional trauma center will prove essential.   Nursing services and patient observation are a part of the areas of responsibility of the staff of this combined department. The number of observation beds is dependent upon the program requirements. Inpatient beds may or may not be included as part of an LEC.
  • Clinical services. Traditional siloes of clinical services are integrated into a single customer-focused diagnostic and treatment center. The range and variation of clinical services will depend on a number of factors, including geographical location, demographics of the served population, patient volume and sharing arrangements with other area wellness districts. A customer-focused outpatient center arranged so that services are easily accessible from a single reception point will improve the patient experience. Personal data systems can assist the staff in meeting the individual needs and expectations of each visitor. The goal should be to make the visit smooth and seamless without wait time in the care delivery process. Depending on the functional program, clinical services may include:
    • Outpatient service center
      • Universal exam rooms/urgent care/recovery
      • Surgery center
      • Imaging center
      • Infusion
      • Sleep study
      • Endoscopy
      • Integrated Practice Unit (IPU) tele-video support
      • Laboratory
      • Ultrasound
      • Respiratory therapy
      • Treadmill – EKG
      • Phlebotomy
      • Pulmonary function testing (PFT)


  • Administrative services and Retail operations Administrative and business functions can be condensed and consolidated. In a direct care system there will be fewer business office functions.
    • Retail operations
      • Optometry
      • Durable medical equipment
      • Health and fitness
      • Pharmacy
      • Dentistry
    • Administrative services
      • Administrative and business staff
      • Information technology
      • Human resources


Clinical services in a Life Enhancement Center must be provided in the most cost-effective manner possible. A highly capable cross-trained staff is already a feature of many rural and community health centers. It is time to take this attribute to the next level.


Life Enhancement Centers must take advantage of those services that can be provided better than others, improve the services that are marginal and be willing to forego those services that cannot be provided in a high quality, cost effective manner.

A life enhancement center should be an open, airy and sunlit space where wayfinding is natural and intuitive. The frame should consist of large structural bays, without bearing walls, with the superstructure high overhead. A high superstructure allows an intervening space to be built above the ceilings of the occupied spaces. This space will contain mechanical, electrical and communications systems, so that the occupied spaces below can be modified or reconfigured at will and at a reduced cost.

Whenever possible, LECs should be designed with features promoting a healthy and safe environment, not only for visitors and guests, but also for the staff and caregivers. Evidence-based Design is a relatively new field of study that is working to document scientific evidence of design concepts that have been shown to reduce stress, enhance safety and promote healing environments. Rigorous documentation of evidence-based design studies can form the basis of anticipated performance in a new facility.

Anything, anytime, anywhere.

The LEC will become the coordinator of health-related data and communications for the wellness district. With a broadening definition of what information is health related, issues of privacy and data security will also expand exponentially. Electronic data will play a major role in monitoring the health-related activities and lifestyles of the general population.

Privacy and security in a system that values widely spread and diverse data sources will require different levels of security and protections. Cloud-based systems can provide the ability to share data across multiple platforms from any location with internet access or with smartphone coverage.

Access to mobile physicians or non-physician providers for consultation in a dynamic dance of collaborative care reduces the need for costly infrastructure investments and allows for greater flexibility to adjust to new technologies.

As wondrous as technology has become, it is of little value without human interaction. A patient who has diminished capacity or who may have fallen behind the technology curve will derive little value from a monitoring device or communication tool that he or she does not understand. Having a mobile care provider come to the home and interact with him or her will pay dividends. With the mobile care provider maintaining routine personal monitoring, the primary care physician will be able to devote more of his or her time to a reduced number of clinic visits. This will result in doubling or even tripling the amount of time that a physician can use in quality interactions with those patients needing his or her attention.

Margin to sustain the mission

Moving from a fee-for-service model to a value-based model will move the providers, represented by a wellness district, to a merit-based business model. Providers will be able to weigh and mitigate risk and formulate strategies to increase margins by optimizing performance. A capital investment that will improve operational and clinical efficiency can have a demonstrated positive impact on patient outcomes and on the system’s bottom line.

A healthcare system based on value seeks speed and efficiency to provide positive outcomes and thus improve the provider’s margin. It has been shown that the total cost of a healthcare facility including the building, equipment and design fees accounts for approximately nine percent of the total cost of a healthcare facility over its twenty-five year life expectancy.

Public/private partnerships (P3s) may become an attractive alternative to traditional sources of capital such as USDA loans, public bond offerings or loans from financial institutions. In a fast-moving ever-changing healthcare environment, asset liquidity is important. Partnering with an investor who has experience in recognizing and leveraging risk versus potential reward may be an intelligent decision. P3s can be structured to provide a design, build and leaseback arrangement with the operating costs of the facility built into the contract.

A hospital that has become an edifice to a system that is no longer viable can be transformed into or replaced by a life enhancement center (LEC), which is an investment in a brighter future.


Form ever follows function, but function is determined by a culmination of societal, cultural, financial, political and technical issues. We are a large diverse culture that strives for a healthcare system that is responsive to our needs and accountable for our care. An LEC’s form may be as diverse and unique as the community it serves. It may also change, morph, expand or contract as the needs of the community evolve and as the methods for fulfilling that need come onto the scene and then fade away. It is an investment in a dynamic, fluid form that forever chases the most challenging, yet rewarding callings in history.

A building is the embodiment of its purpose for being. By defining its purpose, you define its function. By defining a building’s function, you define its form.

The LEC can become the center of community social activity and the focal point of healthy lifestyles. A system that is self-supporting and achieves a symbiotic relationship with the community it serves will be sustainable well into the future.

Douglas Elting

June, 2014

Edited: Oct 2015


The Value of Integrated Practice in the Rural Healthcare Initiative

I was fortunate to be present at a healthcare conference some years ago and recall a story told by Dr. Douglas Eby. Dr. Eby spoke about a patient named “Frank.” Frank was a “frequent flyer.” He was afflicted by a chronic disease with complications; his health reflected poor lifestyle choices. Frank was transported by Emergency Medical Services to the emergency department about once a month and admitted to inpatient care from the emergency department about half of the time. Frank had a bag packed and placed beside his recliner so the EMTs could pick it up on the way out. Despite a medical care expense of approximately $250,000.00 to $300,000.00 per year, Frank’s health continued to deteriorate.

Dr. Eby and his team assessed Frank’s condition and created a personalized care plan built around his specific needs. Someone visited Frank in his home to coach him and determine what was keeping him from reaching his potential as a healthy person. That caregiver listened and tried to figure out just who Frank was as a person. They talked about his life choices, his support system, his family and the things that made him happy. In short, the caregiver and Frank formed a compassionate relationship.

Within a few months, through the interventions of an integrated team of specialists and through the encouragement of someone Frank trusted and who cared about him, Frank’s health improved. He did not become a picture of health, but the number of his visits to the emergency department were cut in half, requirements for hospitalization were reduced and Frank’s health began to show an improvement that hadn’t happened for years. There was a light in Frank’s eyes that hadn’t been there before.


Is there opportunity in adversity?

Is there a reward for doing the right thing in healthcare today? How can a rural healthcare provider survive and even prosper in an environment where it seems that they are being squeezed from all sides?

Healthcare in the US today, like Frank, is not in good shape. It’s in a period of transitional uncertainty. No one seems to know what the future will look like, but most indications would point toward a negative situation for rural health.

A valuable piece of this puzzle is the advent of the Integrated Practice Unit (IPU). IPUs are the third critical leg of the stool that includes wellness districts (value-based health systems for a geographical area) and life enhancement centers (medical facilities specifically designed to meet the needs of the population) that together, support a merit-based system of healthcare. IPUs, combined with direct primary care patient-centered medical homes (PCMH), will form a mutually-supportive, integrated and sustainable population health model.

For the purpose of this article, an IPU is defined as a dedicated team of professionals focused on a chronic condition and functioning in a coordinated and integrated manner in the best interest of the patient. The concept of an IPU was born from the work of Michael E. Porter and Elizabeth O. Teisberg in their book Redefining Health Care: Creating Value-Based Competition on Results, Harvard Business School Publishing.1 The care of those patients with multiple diagnoses will be coordinated with other IPUs and draw upon the expertise of others as necessary. The composition of an IPU is not defined by a physical location, but by an integrated communications and coordinated-care network based on needs of the individual.   In order to derive desirable value-based performance, primary care physicians and integrated practice units must form a mutually-supportive, collaborative relationship bound by trust and communication. IPUs must work with primary care physicians to identify potential high-risk people within the wellness district (to read more, see: and provide preemptive interventions. Collectively, the IPUs and the primary care patient-centered medical homes (PCMH) treat not only the disease, but the related conditions and complications that occur along with it.

IPU graphic

IPUs excel during periods of greater care intensity. The primary care provider, with the assistance of the patient care coordinator, delivers long-term care stability and support during periods of respite. The key to improved patient outcomes is the collaboration and coordination of the entire care team over the life span of the patient. The primary care physician, who is closest to the patient, will be the coordinator and arbitrator between multiple IPUs.


Where will the money come from to capitalize this change in care delivery?

In broad numbers, 75% of the $2.8 to $3 trillion annual healthcare expenditure is allocated to care for the chronically ill. This places the cost of care for the chronically ill at approximately $2.25 trillion per year.   The accumulated cost of waste in the system, defined as unnecessary or duplicative services and overhead that is of little or no value to the patient, is estimated to be approximately 30 to 40% of this number or approximately $675 to $900 billion per year. Those wellness districts, hospitals and systems that can aggressively translate this waste into margin by pivoting to a value-based agenda will reap huge benefits.

If healthcare providers within a wellness district are prepaid with funds allocated for covered patients within that district based on the median of current costs and established outcomes, positive deviations from that median baseline will result in improved margins for those providers. Conversely, those providers whose costs and outcomes are defined as being at or above the established baseline will find themselves at risk for additional cost due to poor quality care. They will either change their processes to improve quality and reduce costs or leave the field to others who will experience greater volumes and better outcomes.

Those wellness districts, hospitals and systems that can aggressively translate this waste into margin by pivoting to a value-based agenda will reap huge benefits.

Physicians and wellness districts, together with their board of trustees, must take a leadership role in making this transition. The effort to inform and explain these changes to the general public is critical to the success of these endeavors, and includes having the necessary personnel and resources available to counter naysayers and those who are ill-informed.


Can we do well by doing the right things?

Efforts to fix components of a dysfunctional system will yield only minimal positive results. The payment system must track the healthcare delivery system. “In healthcare, the overarching goal for a provider, as well as for every other stakeholder, must be improving value for the patients, where value is defined as the health outcomes achieved that matter to patients relative to the cost of achieving those outcomes. Improving value requires either improving one or more outcomes without raising costs or lowering costs without compromising outcomes, or both.”2

“In this environment, providers need a strategy that transcends traditional cost reduction and responds to new payment models. If providers can improve patient outcomes, they can sustain or grow their market share. If they can improve the efficiency of providing excellent care, they will enter any contracting discussion from a position of strength. Organizations that fail to improve value, no matter how prestigious and powerful they seem today, are likely to encounter growing pressure (due to reduced reimbursement). Similarly, health insurers that are slow to embrace and support the value agenda—by failing, for example, to favor high-value providers—will lose subscribers to those that do.”2

IPUs will compete based on a value agenda of highest quality and lowest cost. Competition will further occur between independent IPUs and those within integrated delivery systems.  Those providers who do not participate in value-based programs will see their margins disappear and will either improve or leave the field to those who do. The consequence of this evolution will reduce the numbers of those providing complex care and will increase the volume for those who provide the highest quality at the lowest cost. This increased volume will further reduce costs and improve outcomes. “Providers that concentrate their volume will drive a virtuous cycle, in which teams with more experience and better data improve more rapidly—attracting still more volume. Superior IPUs will be sought out as partner of choice, enabling them to expand across their local regions and beyond.”5

While it is anticipated that payers will endeavor to reduce the cost of healthcare by following the median cost curve downward, keep in mind the old adage, you don’t have to outrun the bear, you only have to outrun your buddy.


An arrangement between a wellness district and an IPU may take the form of a bundled payment for value. “Sound bundled payment models should include: severity adjustments or eligibility only for qualifying patient; care guarantees that hold the provider responsible for avoidable complications, such as infections after surgery; stop-loss provisions that mitigate the risk of unusually high-cost events; and mandatory outcome reporting.   IPUs may compete on the basis of value received as represented by positive patient outcome divided by cost, not on the basis of services performed.”3

The more sick people that can be identified and brought into the system, the greater the wellness district’s potential margin will be as lives improve.

fee for service health care model

Wellness districts can form self-insured systems, either through the population of willing persons within their service area or in combination with other districts. Through these self-insured systems, risk can be mitigated, catastrophic policies can be negotiated with integrated delivery systems and reinsurance policies can be put in place. Wellness districts need to get solid patient data and predictive analysis for their population. They must reach out to employers, businesses and educational systems within the district; discussions and negotiations between the parties can result in greater participation in wellness programs, define the role of health savings accounts and reduce premium costs. Most importantly, wellness districts must find the chronically ill and swarm to that 5 to 10 percent of the population. The more sick people that can be identified and brought into the system, the greater the wellness district’s potential margin will be as lives improve.


What about infrastructure to support the care delivery model?

For larger integrated delivery systems, incorporating IPUs into the structure of the organization requires an assessment of the role and purpose of each individual provider in support of the patient-condition-based value agenda. “To achieve true system integration, organizations must grapple with four related sets of choices: defining scope of services, concentrating volume in fewer locations, choosing the right location for each service line, and integrating care for patients across locations. For community providers, this may mean exiting or establishing partnerships in complex service lines, such as cardiac surgery or care for rare cancers. For academic medical centers, which have more heavily-resourced facilities and staff, this may mean minimizing routine service lines and creating partnerships or affiliations with lower-cost community providers in those fields.”4 A disjointed group will seldom be able to achieve the same result as a dedicated team focused on a specific patient condition.

In order to assemble the best IPU team members to address the unique needs of patients with multiple diagnosis, and the competition for the best IPUs the can provide the best outcomes at the lowest cost. This may result in team members that are dispersed over remote locations both nationally or even globally. The ability to form trusting professional relationships that focus on the patient and the best possible result from the patient’s point of view will be critical in the success of any healthcare system.

While larger integrated delivery systems would appear to have a distinct advantage over independent wellness districts or group of wellness districts in the field of integrated IT systems, new technologies and the necessity of finding commonality within electronic health record systems will help level the playing field. The acceptance of cloud-based technologies that allow anytime/anyplace data sharing from a variety of disparate entities and stakeholders will connect patient care coordinators to a variety of retail and public service agencies. The advancement of patient monitoring systems and smart technologies will provide the capability to reach into the home environment and detect abnormalities and warn of impending detrimental situations that may affect or trigger adverse events. Whether the described model operates from a wellness district, a group of wellness districts, or as part of an integrated delivery system, the ability to support care integration through a robust digital communication system is paramount.

As with many successful business models, the ability to communicate information in a timely manner is critical to creating value. In the case of care integration of the chronically ill, there is no substitute for a comprehensive IT platform. A value-based IT platform must:

  • Use data that is common and can be integrated with prominent, known record systems.
  • Be user friendly and capable of collecting data from diverse sources.
  • Be built around the patient. Patient information must be all-inclusive, but only available on a need-to-know basis to help protect privacy.
  • Be capable of both simple entry by the patient or providers and robust enough to include templates for complex multiple diagnoses.


What others are doing

  • “For eight years in a row, health insurance company Cigna [sic] has released results from a comparative study of its consumer-driven health plan (CDHP) members to its other members enrolled in traditional PPOs and HMOs. The actual claims data from more than 3.6 million Cigna members were used in the study, and Cigna concluded—as it has in the past—that members enrolled in CDHPs were more engaged in their own health and lowered their total medical expenses. Cigna currently counts about 2.6 million CDHP members. The insurers CDHP members were 50 percent more likely to complete a health risk assessment and 41 percent of those with chronic conditions were likely to take advantage of disease management programs if they were enrolled in a CDHP. That’s up from Cigna’s 2013 version of the survey, which found CDHP members with chronic conditions were 25 percent more likely to take advantage of those programs.”6
  • “Kentucky analyzed its patient population data and found that in one year, 350,000 Medicaid recipients used ERs to the tune of $341 million. 4,400 recipients were classified as super-utilizers who visited the ER 10 or more times at a cost of $34 million. According to Dr. John Langefeld, chief medical officer for the Kentucky Department of Medicaid Services, the biggest challenge [had] been coordinating between providers who [had] historically worked in silos and had limited interaction. However, in the long run, the project has the potential to improve clinical decision making by amalgamating traditional disparate data sets and ameliorating communications between health care stakeholders. Langefeld said officials realized they need to form coordinated care teams within these communities to better understand and holistically treat super-utilizers because many had behavioral and/or substance abuse problems as well as housing, hunger or transportation issues.”7
  • “A recent study of the relationship between hospital volume and operative mortality for high-risk types of cancer surgery, for example, found that as hospital volumes rose [sic] the risk of a patient’s dying as a result of the surgery fell by as much as 67%. Patients, then, are often much better off [sic] traveling longer distance to obtain care at [sic] location where there are teams with deep experience in their condition. That often means driving past the closest hospitals.”7
  • “MD Anderson, for example, has four satellite sites in the greater Huston region where patients receive chemotherapy, radiation therapy, and, more recently, low-complexity surgery, under the supervision of a hub IPU. The cost of care at the regional facilities is estimated to be about one-third less than comparable care at the main facility.”5
  • “Compared with regional averages, patients at Virginia Mason’s Spine Clinic miss fewer days of work (4.3 versus 9 per episode) and need fewer physical therapy visits (4.4 versus 8.8). In addition, the use of MRI scans to evaluate low back pain has decreased by 23% since the clinic’s launch, in 2005, even as outcomes have improved. Better care has actually lowered costs… Virginia Mason has also increased revenue through increased productivity, rather than depending on more fee-for-service visits to drive revenue from unneeded or duplicative tests and care. The clinic sees about 2,300 new patients per year compared with 1,404 under the old system, and it does so in the same space and with the same number of staff members.”2



As wellness districts and physician groups transition to contracted direct care models and collaborate with either independent IPUs or integrated delivery system-based IPUs, they will drive down volume in emergency departments and inpatient care departments of the hub or regional medical centers.   Conversely, they will increase the volume of complex cases due to the concentration of chronically ill patients over a wider geographical area. The increased revenue from value-based IPUs and decreased revenue from fee-for-service models will accelerate the transition of hub hospitals and regional medical centers to value-based models with better patient outcomes at lower cost.

“Never change things by fighting existing reality. To change something, build a new model that makes the old model obsolete.” Albert Einstein


Douglas Elting

May, 2014

Edited: Oct 2015

The Transformation of Rural Health

Healthcare is changing.   I’m reminded of the old television show with Redd Foxx, grasping his chest and proclaiming “This is the big one!”

Politicians come and go, CMS programs, revisions and studies change on a moment’s notice, reimbursements are cut, and missions are altered. Above it all, are the relentless market forces that force us to rethink what we are doing and why we are doing it.

We are told that the healthcare industry must change from being a reactive episode-based system to a collaborative, proactive process that enhances wellness, provides health maintenance and reconnects the physician and the institution with the community. We cannot look to others to make this happen. It’s up to us.

Perhaps it is time to rethink our mission, define the basics of community wellbeing and structure our services too efficiently and effectively meet those needs. At the present time, our rural and community hospitals are too expensive and inflexible. They are too often built as a smaller version of a metropolitan hospital rather than that of a unique complimentary care provider.

But what does the face of rural health look like? Is it a hospital? What is different than its current state and what are the advantages of changing?


New wellness/rehab addition at Butler County Health Care Center, David City, Nebraska                         Daubman Photography

“Shifting healthcare from a point of service clinical model to an ongoing dialog between patients and providers is a profound societal and [technological] shift.” Robin Guenther, Fast Company

Think of a community wellness organization as an enhanced Dr. Welby. (If you can remember Redd Foxx you may remember Dr. Marcus Welby.) People don’t want more treatment, they want better health. Most of all, they want to associate and form relationships with people who genuinely care about them.

The people in mid-America are known for their self-reliance and ingenuity. The trend underway from governmental agencies is that rural healthcare will be squeezed either through reduced reimbursements or geographical restrictions or both. The future most likely holds the elimination of cost-based reimbursement with the adoption of value-base compensation taking its place. Vertically-integrated accountable care organizations, together with accompanying mergers and consolidations, are sweeping the country. It is time for rural America to exhibit the qualities that are its strengths. We must form our own future.

Healthcare in rural America can define its own destiny and fulfill its mission of service to the community by weaving itself into the fabric of the local culture. This can be accomplished by developing systems that respond directly to the health needs of the people both inside and outside of our walls.   In order to do so, we must position our organizations to take advantages of those services that we can provide better than anyone else, improve the services that are marginal and be willing to forego those services that we are not able to provide in a high quality, cost effective manner. In a value-based healthcare system, resources will flow to the highest quality lowest cost provider. It will be in the best interest of affiliated partners to maintain population health at the most basic level of care in the patient’s home and in the patient’s home communities.

We think the following statements ring true:

  • Healthy lifestyles make healthy communities. Healthy communities make high quality, efficient healthcare systems. Sponsorship of farmers markets and other nutrition programs build community interest in wellness and integrate individual responsibility for healthy choices. Wellness programs can become community social attractions to define the local healthcare center as the source of health and vitality.
  • Facilities must be easily accessible, flexible and reconfigurable. The facility must be re-envisioned to focus on the provision of services that will maintain health, enhance public participation and redefine the scope of care. These health centers will be a reflection of individual community needs and the mission of the providers.
  • Information concerning a patient’s health should be available to care providers anywhere at any time. Mobile health tracking devices should be used extensively within the parameters of patient privacy. Physicians and nonphysician providers should be freed from the confines of clinics and hospitals. Care coordinators, working with mobile care providers should visit the homes of those with chronic illnesses to find ways to improve their medical conditions.
  • The primary care physicians are critical to the success of rural health. Local health care facilities and physicians should work together to form strong collaborative arrangements. Collaborative organizations can simplify payment structures, realign physician/patient relationships, increase physician compensation and provide payment mechanisms for patient-centered medical home programs.


It all starts in the Home:

Since 75% of medical costs in the United States can be traced to chronic diseases, significant economies can result from proactive interventions including proper nutrition and monitoring of medications together with social support services. The patient care coordinator becomes an emerging profession in a value-based care model. This critical position becomes the focal point that connects and monitors the relationships formed between physician and nonphysician providers and members of the community. Patient care coordinators use information gleaned from a broad base of data to form courses of action based on predictive modeling. Through consultation with physicians and nonphysician providers, a broad spectrum of support services can be deployed to improve health outcomes within the service area of the providers.

direct care model

New technologies including digital communication devices (such as smart phones and digital tablets) hold the promise of closely monitoring patient conditions, providing a remote personal interface with care providers, scheduling appointments and delivering test results. It is important to note that nothing can replace the personal contact and relationship formed between the patient and the care provider. When an electronic interaction is appropriate, a mobile care provider should be present in the patient’s home and facilitate that interaction. The mission of the mobile care provider is to use their personal communication skills and the mind of a detective to ferret out any impediments to good health regardless of the source. This integrated collaborative team, focusing on the individual, is the key to the success of an improved national healthcare system.

“Healthcare provision is specialized down to the patient, who is treated as individually as a snowflake.” Pierce Story


The Creation of Wellness Districts:

The transition of our present fee for service compensation model to a value-based compensation model is no small task, but it is an imperative in the quest to reduce costs while, and at the same time, improving safety and enhancing outcomes. It is envisioned that the immediate future of rural healthcare may take on the following features:

Rural community, county and critical access hospitals will become components of Wellness Districts composed of Life Enhancement Centers coupled with physicians and physicians groups. These Life Enhancement Centers (LEC) are flexible and agile facilities containing a variety of services meeting the needs of the population. The LECs could contain: patient-centered medical home physicians’ offices, wellness and rehabilitation centers, specialty clinics, diagnostic centers, wound care centers, nutrition and cooking classes, outpatient treatment centers and urgent care facilities. LECs may include related services including dental offices, eye care specialists and retail functions including: durable medical equipment, opticians, retail pharmacies, food services etc.

Wellness Districts will receive payments for maintaining the health of the people in the service area.   The Wellness District would receive a prepayment from the state for Medicaid participants, the Centers for Medicaid and Medicare Services (CMS) for Medicare participants. They would also receive prepayments from local employers and from private citizens to provide for the individuals unique health needs. This value-based compensation would include funds for catastrophic wrap-around insurance coverage for major life threatening events such as heart failure, cancer, trauma or other services not provided by the Wellness District. The Wellness District would have the incentive to keep the people in its service area healthy to reduce its costs and increase its margin.

The advantages of this system are multiple and profound:

  • The system can redefine and realign the relationship between the care provider and the care recipient. This is particularly effective when the recipient has some investment in the process such as through a private payment or a health savings account. Employer sponsors may also contribute to a realigned emphasis on wellness. Through whatever means available and appropriate, an effort should be made to incentivize good health, wellness and participation by all parties.
  • Contracted direct primary care provides an efficient payment mechanism to allow care givers to customize and to tailor wellness programs to meet the specific needs of the recipient. The goal of caregivers, under a properly designed value-based program, is to maintain and/or improve the health of the covered population through lower cost proactive interventions. It will be in the best interest of the providers to offer wellness programs, nutrition programs, dependent chemical dependency cessation assistance, and group health education programs to the recipients.
  • By elimination of small claim processing costs, collection of unpaid accounts, co-pays, unnecessary clinic visits and overhead costs can be dramatically reduced. Patient-centered medical home practices are shown to reduce emergency room visits, emergency medical services, costs associated with readmissions, etc.
  • Resources in a vertically-integrated system will flow to the highest quality, lowest cost provider. It will be in the best economic interest of large hospitals to enhance the quality and extent of services offered by wellness districts. Therefore, larger hospitals and hospital systems will extend specialty physicians and services to rural areas and will provide assistance for technical support related to electronic health records, data mining and in-home health monitoring systems.
  • When rural health facilities focus on community involvement based on good health, it can spawn economic development. Evidence of this may be a simple as a wellness district’s support of a farmers market encouraging the use of high quality locally-grown food products coupled with nutrition education programs. An LEC may also become a hub for not-for-profit entities and retail stores supporting sports and wellness activities within mixed-use developments.

“Create an agenda that goes beyond healing that would be appropriate, unique and perhaps life changing for your patient population.” David Rockwell


Douglas Elting

January, 2014

Edited: Oct 2015