“A paradigm shift is occurring in health care”  said Dan Ausman, CEO of Methodist Hospital. He said our health care system is moving towards “fee for health” not “fee for service.”  The prior model was that doctors were paid for procedures, not for the patient getting well.

Dan knows what he is talking about. His family roots are in health care and he has thirty years experience in health care administration. Prior to Arcadia Methodist he worked in Arizona in a larger operation but he wanted to come back to California – he had enough of cacti and desert.  His education was at UCI and USC – Southern California is home.

Some brief statistics on Arcadia Methodist: $250 million in revenue, the biggest employer in Arcadia, one of the big three in the San Gabriel Valley. 600 Doctors, 2100 employees.  17000 admissions, 5000 surgeries, 43,000 people through the E.R. and 1800 babies delivered per year.  The new tower, opened in 2011 for $300 million.  We have a state of the art facility of which we should be proud.  Paying for it is presenting some challenges.

“The train has left the station,” Dan said.  “Whether we have Obamacare or not, change is happening.”  Health providers have to have better outcomes than in the past and hospitals have to take responsibility for the community, not just medical procedures.  Dan went on to describe the kinds of changes.

For a starter, small business cannot absorb double digit cost increases that have led to a doubling in health care costs in the last nine years.

Medicare is a big piece of the changes that are happening.   It contributes to 50% of the deficit and is expected to be insolvent by 2020 if costs continue to rise as in the past.

Hospitals will have to learn to break even on Medicare payments and work on an overall 30% reduction in costs from current levels.  They will have to do more, do it better and do it for less money.  Medicare payment reductions began this year and will continue to reduce until 2017.  If the hospital meets certain performance metrics, some of the money can be claimed back.

The hospital has spent $20 million on a new mandated Electronic Medical Records system.  “Many physicians hate it,” Dan said.  But it is mandated to be implemented by 2015 to better coordinate care.

Management has to make hard choices.  Dan explained the pediatrics department was closed because there is a Children’s Hospital clinic and Huntington Memorial that can serve the local population.

Innovation is also expected to help change the health care paradigm.   “Hospitalists” are one of these innovations.  Doctors that stay at the hospital full-time will help coordinate care with off-site doctors.

Dan said that there is lots of grumbling and discontent in the health care world. Change is hard; we all know that.  But he said he thought it was “a most opportunistic time in health care.”