Essentials for Thriving Orthopedic Joint Ventures - Dr. Caillouette

Many of our readers know that Hoag Orthopedic Institute is an orthopedic hospital that operates in a joint-venture with Hoag Memorial Presbyterian Hospital in Newport Beach, California. HOI is a physician-led enterprise involving approximately 35 physicians specializing in orthopedics, and this makes us unique. In our ongoing effort to inform readers and answer questions, we requested an interview with Dr. James T. Caillouette, Surgeon-in-Chief at Hoag Orthopedic Institute. He is currently focused on healthcare economics and reform.

HOI: Thank you Dr. Caillouette. Could you describe for our readers some of the reasons the HOI joint venture with Hoag Memorial Presbyterian Hospital has worked out so well that it has become a model for others?

Dr. Caillouette: We set out to create true alignment through trust. We have seen that 50-50 governance has helped the HOI reach alignment and avoid major problems. I think one of the benefits of our community hospital and our partner in this enterprise was that they recognized it should be physician led. They recognized 85 percent of the cost is driven by the physicians. They also recognized that physicians, nurses and physical therapists had deep knowledge in how to create best outcomes at low costs.

When Hoag founded its Ambulatory Surgery Center (ASC) in the 1990s, I pushed to partner with the hospital. We could have taken 100 percent of equity in the ASC, but in the long-term, it ended up being an 80-20 split. At one point, it was a 50-50 split. But I believed the future would dictate efficiency. In order to do that, we needed to let everybody have a stake. Ultimately they went along with it, and now, having that partnership for that decade allowed us to partner on a much greater scale.

HOI: Could you tell us some of the benefits to having created a physician-led enterprise?

Dr. Cailloutte: One of the benefits at Hoag Orthopedic Institute is that physicians are the only people to negotiate with vendors, which can be a vendor’s worst nightmare. When you have orthopedic surgeons, it’s a different game from negotiating with supply chain managers. We can use our understanding of value in terms of how we’re going to drive this enterprise. That’s been very enabling for our nurses and therapists. Everyone has an opportunity to contribute to creating value.

HOI: What guidance would you give to others who are considering following the HOI lead?

Dr. Cailloutte: I would say that culture trumps everything. Leadership should work hard early on to establish a culture that is physician and value driven. Physicians are actively engaged in every level of care at HOI. Through all the various elements of the hospital, including where they sterilize implants, we sit down on a weekly basis with all employees and talk about problems, solutions and ideas. We wanted a culture where the phrase ‘think different’ really helps drive the culture. You want to have accountability and creativity at the same time. Your leaders should aim to create cultures where employees are not hesitant to demonstrate creativity.

Most people tend to lock into the cost-side of the business equation, but I recommend an equal focus on revenue as well. Don’t be afraid to ask questions of the CFO and supply management team. Physicians who are detail-oriented and enjoy the task of grinding numbers are valuable assets to the team. These physicians can better understand, from a care delivery standpoint, the implications of switching from one product to another. The cheapest product doesn’t necessarily create the greatest value. If it potentially risks outcome, you will ultimately drive down value.

In a physician and value driven culture physicians have to think beyond being orthopedic surgeons. If they take responsibility to lead, they have to go back to school and learn, broaden their knowledge base and read about healthcare administration and macroeconomics. Also it's important that they work on looking at outcomes from a patient perspective, not a surgeon’s perspective. Cost is not just the cost of the inpatient episode, but the global cost. The cost from the moment they call you to make the first appointment to the end of their physical therapy appointments. If you start to do this, and drive you enterprise with all these things in mind, it can be transformational.