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Jefferson Health forms as merger closes, sets aggressive 'innovation' plans

The system wants to bring physician expertise to suburbanites through telehealth, urgent care centers and Abington’s three community hospitals.

Thomas Jefferson University Hospital photo by Andy Gradel via <a href="http://en.wikipedia.org/wiki/Thomas_Jefferson_University_Hospital#/media/File:Thomas_Jefferson_University_Hospital_in_Philadelphia.jpg">Wikipedia</a>Thomas Jefferson University Hospital photo by Andy Gradel via Wikipedia

Thomas Jefferson University Hospitals and Abington Health System have completed their merger, forming Jefferson Health to compete with Philadelphia’s University of Pennsylvania Health System, the largest in the city. The question now is whether the system will be as much of an industry disruptor as CEO Stephen Klasko, MD, has promised.

“Jefferson Health is truly different, because now patients can choose an organization that marries the nationally recognized and renowned academic medical center of Thomas Jefferson University with the outstanding clinical reputation and community connectedness of Abington,” said Klasko.

Jefferson Health, with a medical school and five hospitals, is pursuing a mission of education, research and advanced medicine. It’s on a slightly smaller scale than competitor Penn Medicine, which is researching diseases and treatments with $409 million in NIH funding, and offering access to clinical trials and new treatments through a soon-to-be five-hospital system with the planned acquisition of Lancaster General Health on the horizon.

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Jefferson Health has been designed to extend the expertise of Jefferson clinicians to suburbanites through telehealth, urgent care centers and Abington’s three community hospitals and clinics, rather than set up a regional referral network for an academic medical center to keep doing its best work at an urban hospital complex,  Klasko said.

“This new urban-suburban hub-and-hub model we believe is the first in the country,” Kasko said.  “If you look at a lot of mergers, it’s a hub and spoke, an academic medical center in the city, and people have to travel and it increases the costs.”

Jefferson Health’s goal, Klasko said at a press conference, is “going from a Blockbuster model to Netflix model, bringing Jefferson care and Jefferson and Abington care to the patients as close as they can be.”

The new system, spanning Philadelphia and its northern suburbs, features five hospitals (including Abington Memorial on the edge of the city and Jefferson’s downtown 950-bed University Hospital), nine outpatient centers and four urgent care centers, all staffed by 19,000 employees and 3,370 physicians. Among the executives at the new health system are Praveen Chopra, chief information and transformative innovative environment officer; Anne Boland Docimo, MD, chief medical officer; and John Ekarius, chief strategy officer. The board includes 11 trustees from the old Jefferson, 11 from the old Abington, plus two independent members.

[Also: Tracking 2015 mergers and acquisitions]

Klasko said Jefferson and Abington did not really have to combine to survive. Among the dozen-plus health systems and independent hospitals in metropolitan Philly, both were in solid financials prior to the merger. Jefferson had a net income of $103 million on $2.1 billion in revenue in fiscal year 2014, while Abington brought in $17.6 million on $774 million in revenue.

But last summer, when Klasko dined with Larry Merlis, Abington’s CEO and COO of the new system, there was a connection that suggested the two organizations shared a vision for the future. “After the glass of wine, it became more obvious that Jefferson and Abington would be a great fit,” Klasko said.

The Netflix model

A 61-year-old OB-GYN, MBA and Philly native, Klasko has done quite a bit in stoking Jefferson’s brand in his two years on the job as CEO. He lambasts the arcane, dysfunction aspects of American healthcare — from the six-figure debt for patients to phone call scheduling systems,— and points to consumer technology as inspiration. “Why can I be in my pajamas the day after Thanksgiving watching Game of Thrones and doing all my holiday shopping, but if I have a stomach ache, I still have to get on the phone and hopefully somebody will see me two days from now?” Klasko said in an interview earlier this year.

“I see this as an absolutely seminal moment in healthcare,” he said. “We're going to change the DNA of healthcare one physician at a time," he also said in a TEDx Talk, outlining a vision for “Jefferson 3.0.”

[Also: M&A strong in 2014]

Klasko has been saying that American healthcare needs to change for the better part of a decade, since he was head of the University of South Florida College of Medicine. His record there was mixed. One former colleague told Philadelphia Magazine that Klasko’s “disruptive innovation” agenda was seen as “just disruptive.”

At the Villages retirement community, Klasko spearheaded a $4 million USF medical clinic with the goal making it "America's Healthiest Hometown." USF pulled out the project last June, taking a $5 million loss. Another initiative, the $38 million Center for Advanced Medical Learning and Simulation, lost $2 million for the 2013-14 fiscal year, but is still seen as part of needed changes in the ways medical students learn to become doctors, nurses and caregivers.

Competing in Philly

At Jefferson, Klasko said he has a mandate to evolve the enterprise, which  “means everything from literally changing how we select and educate students” to “changing the most expensive place to can get care, the urban academic medical center,” he said. “We believe that 65 percent or so of patients who end up in a hospital’s emergency rooms don’t need to be there, and not just because it could not just be five hours of a patient’s life but $1,500 of their deductible.”

The hub-and-hub health system can be the way to “get patients to the most efficient and effective place for them to get care,” Klasko said. “That might be their home with telehealth. That might a Jeff Connect urgent care center. That might be a freestanding ER, or if they’re really, really sick, they should go to the most expensive, high acuity ER at the hospital.”

Whether Klasko’s ideas and Jefferson’s vision translate into more affordable healthcare remains to be seen, said Robert Field, a Drexel University health researcher who writes the Field Clinic column in the Philly Inquirer. For one thing, Field said, neither Jefferson nor any other regional provider system has made headway in improving patient billing, although the region’s largest insurer, Independence Blue Cross, is trying to make progress on the price shopping front.

Jefferson is also not the only area health system looking to create an integrated health network spanning the suburbs and center city Philadelphia. Jefferson bought the naming rights to a downtown train station, but all across the region, residents are beckoned with advertising for systems such as Temple Health, Einstein Healthcare Network, Main Line Health, Doylestown Health, Jefferson and Penn Medicine. The competition between Penn Medicine and Jefferson as the largest and second largest academic medical centers in the region has been explicit, though still friendly, said Field, who worked in management at the Penn’s health system in the late 1990s.

Jefferson and Abington have a slight advantage on the retail clinic approach. Like other metro areas, Philly has dozens of urgent-care clinics, though only a few are operated by major hospital systems.

That, along with the expanded telehealth options Jefferson is rolling out with the American Well on-demand telemedicine company, could put Jefferson ahead in an area that Klasko thinks is growing more quickly than some healthcare executives might like to acknowledge.

[Also: See how one hospital went green]

In 2010, Klasko and a group of academic medical center leaders were at a conference when Walgreens announced the launch of its walk-in clinics. Klasko remembered many of the deans laughing it off: “What a stupid business model. Who’s going to go to a drugstore to have their kid be seen with an earache?”

Billions of dollars later, Klasko said, retail primary and urgent care clinics are one of the fastest growing parts of healthcare, and some providers complain that they are taking away high-margin, low-acuity services.

“The reason isn’t because everybody was excited about going to the drugstore to have their kid be seen. The reason was, back then, if your kid had an earache you would be told by your pediatrician in many places that we could see you in two days,” Klasko said. “Well by then, your kid was either better or had gone to the emergency room.”

Twitter: @AnthonyBrino