Strategic Planning Clinical Programs

School of Medicine Retreat January 30, 2003

Mission Statement

"We promote the health of our patients and our community and advance the frontiers of clinical medicine"

Context- Key Financial Accomplishments of FY 2002

Further stabilization of Stanford Hospital's operating margin, ie first positive operating margin since merger Improvement in practice's clinical revenues ($91m to $108m) and profits ($16.8m) Assessment, with SHC, of capital needs of SHC and of our practice
plans for raising $250m in bond market to achieve it

Consensus-building in funds flow methodologies regarding payments from Hospital to School for services rendered
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Context
Clinical Practice Revenue
Millions

$160 $140 $120 $100 $80 $60 $40 $20 $FY99 FY00 FY01 FY02
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Physician Net Revenue Special Labs & Service Payments Total Payments

Context
Direct Research Expenditures
Thousands

$250,000 $200,000 $150,000

Clinical Depts Total SoM

$100,000 $50,000 $FY98 FY99 FY00 FY01 FY02

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Context
Clinical Departments Revenues
Thousands

$160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $FY99 FY00 FY01 FY02
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Research Directs Clinical Revenues

Ambulatory Growth
Ambulatory services are growing and becoming an increasing fraction of SHC's revenue streams, now accounting for 40% of SHC charges and 55% of faculty charges 57% of faculty collections were derived from outpatient svcs in FY'02 The increasing importance of ambulatory services revenue means that both the faculty and SHC are increasingly dependent on its growth for economic viability, as well as for a secure referral base Neither can afford to concede wholly the profit derived from outpatient services to the other entity
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Professional Net Revenue

Millions

200 150 100 50 0 FY2000 FY2001 FY2002 Inpatient Outpatient Total

Exclusion of LSS (Pediatric based) data for FY2000 and FY2001 Exclusion of Capitation reimbursement for all fiscal years.
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Key Issues in Ambulatory Services

Funds flow in ambulatory services must incent growth
Revenues from newer infused therapies and diagnostics need to be shared between SHC and the faculty to encourage development Attribution of expense to ambulatory services, but not to inpatient services, means largely ambulatory services are being neglected as sites for growth

Newer treatment options for common chronic diseases (immune modulators, etc) tend to be outpatient modalities With the recruitment of a new VP for Ambulatory Services, along with service and operational issues, funds flow issues must be addressed
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Patient Base

A Strategic Imperative: Defining and controlling our access to the patient base around us
Kaiser controls ~ 40% of the patient base around us and is seeking to do its own tertiary/quaternary care Sutter/PAMF accounts for 23% of SHC discharges now and is seeking to consolidate the large majority of the remaining non-Kaiser patients into their system Stanford needs access to patients who will benefit from our care and help us advance medical knowledge

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Patient Base

Potential Strategies for Maintaining Patient Access Create a full service health system Partner with full service systems* Be the quality and value leader**
superior skill sets, knowledge bases, but also excellent service cost basis that is attractive to full service systems and their constituencies
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Unresolved Issues in Potential Satellite Facilities

Should a satellite facility be ambulatory, inpatient, "short stay", specialty-specific?

If we had a partner, multiple issues would arise:
Business model is complex in governance and calculations Medical group representation also is complex

Current reality is that partnering with Sutter remains uncertain, and we need to have an independent strategy

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Quality and Value Leadership

Stanford still enjoys public stature as a quality leader

PacifiCare quality index just released placed us at 95th% of 200 California hospitals, and the highest among academic hospitals UCSF scored at 78th%, UCLA at 58th% in 60 metrics related to common practices UC Davis scored only at 44th %

Patient satisfaction scores in ambulatory services have recently been below historical norms

Third party payers are now introducing "tiering", a designation made by insurers to establish different payments to centers, based on "quality and cost"
Aetna and Blue Cross propose us as first tier designees, but Healthnet seeks to place us in second tier
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Applied Research

Current models

Potential models

Stanford Cancer BMTx Unit Institute Oncology Clinic Stanford Stroke Service Neurosciences Institute Device Development Center Stanford Cardiovascular Imaging Services Medicine Institute
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Newer InitiativesClinical Centers

Multidisciplinary clinical centers of excellence are increasingly the norm across the US because patients want them Centers will have multidisciplinary governance, administrative infrastructure, and may be nested in Institutes, which can serve as the focused research sites from which translational initiatives might arise Centers are planned in cardiovascular, neurological, cancer and transplantation services Centers can help us engage the public and its philanthropy, enlarge our reputation as industry leaders, and be the platform for development of novel strategies, ie be the "critical mass" that smaller subunits will never achieve
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Institutes Scope

Research

Patient Care

Institute for Cancer/Stem Cell Biology and Medicine

Future Institute

Future Institute
Future Institute

Future Institute
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Institute Organization

Institute for Cancer/Stem Cell Biology and Medicine

Research Center
Basic Research Clinical Research
Clinical Informatics

Clinical Cancer Center

Breast Cancer Center GCRC Prostate Cancer Center

ACCESS/SPTRC

Institute-Based Associates

Head & Neck Cancer Center Leukemia Center ????? Cancer Center

Department-Based Affiliates
Translational Research Core Facilities

Radiation Therapy Surgical Oncology Bone Marrow Transplantation

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Faculty Practice Organization

Fundamental issues in FPO

Does it represent and is it composed of faculty at large or chairs? Is it an organization embedded in the Hospital or to the School? Is it a "group practice" with a strong central authority or a confederation of departments? What should it govern and control?
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Practice Organization
Dean and CEO agreed in 8/02 upon structure that recognized a confederation of depts as the fundamental organizational model Council of Clinical Chairs provides forum for input and deliberation about issues surrounding professional practice
Dean, CEO, Clinical Chairs, COO, CFO and Sr Deans for Clinical Affairs and Finance and Administration Meets biweekly, chaired by Sr Dean for Clinical Affairs and COO

Smaller Joint Clinical Planning Committee creates proposals, organizes initiatives and supervises strategic planning
Dean, CEO, COO, CFO, Sr Deans for Clinical Affairs and Finance and Administration Meets at least weekly or more frequently when needed

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Current Organizational Chart

Dean and CEO
Council of Clinical Chairs Joint Clinical Planning Committee
Dean SAD Clin Affairs SAD F&A CEO COO CFO

CEO

Professional Contracts
Adult/Children's Services Carve-out Splits

Professional Billing (PFS)

QA / Compliance

Ambulatory Services

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Goals for 2003

Refine and begin to implement strategy for securing our patient base, by creating off-site ambulatory services, if possible with a partnership with a full service health care system

Refine and enlarge the initiative for institute and center development, as platform for clinical growth and translation Develop further the practice's organizational structure and funds flow to align finances and mission-based goals
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Key Challenges
Availability of timely, accurate data relating to financial performance across the hospital and the faculty practice
Volume, expense and profitability of clinical units P&L, expenses and performance should be transparent

Development of a faculty culture that seeks to enlarge the enterprise's resources, rather than seeking advantage in re-negotiating different splits of it
Centers and institutes will require re-shuffling of some authorities, accountabilities and funds flows

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Key Challenges
Advocacy for and recognition of the value of providers of clinical care and education
enable us to recruit and retain physicians in the "physician-educator line"

Better communication between UTL and MCL lines for translational initiatives

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