Ascension CEO Anthony Tersigni on Friday told employees that the system will undertake a major restructuring, "hinting at transitioning from a hospital-oriented system to one that's focused on outpatient care and telemedicine," Alex Kacik reports for Modern Healthcare.

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Tersigni made the announcement via a video, which Modern Healthcare exclusively obtained.

How the shift came about

Tersigni in the video said the Ascension board of directors earlier this month unanimously backed a new "advanced strategic direction." The move comes as the system is seeking to handle falling reimbursements, regulatory challenges, hikes in drug costs, a shift away from fee-for-service care, and more competition.

Ascension reported $552.69 million in income from operations on revenue of $22.63 billion in 2017, a 27% drop from its $753.2 million in operating income on revenue of $21.9 billion in 2016, Kacik reports. However, Ascension saw non-operating income increase significantly, to $1.31 billion in 2017. It had reported a $275.45 million loss on that measure in 2016.

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Inpatient and ED volumes fell by more than 4%. The company said it may continue to see volumes decline, costs rise, and uncompensated care increase as the system moves toward population health and to standardize operations.

Details of the restructuring

In the video, Tersigni spoke of a "dual transformation." This would entail "transform[ing] current health care delivery operations" in response to a "rapidly changing environment" as well as "safeguard[ing] a sustainable presence in its communities that responds to the changes in how people are accessing care."

In addition, Tersigni discussed several changes the system has already made to improve its finances. For instance, he said the system has reduced administrative costs by $400 million through a realignment of leadership and organizational structures. The changes are expected to save an additional $61 million in fiscal year 2019. Tersigni added that he and executives who report to him directly have taken pay cuts.

Tersigni also noted the use of volume purchasing, national contracting, expense and waste reductions, and internal staffing solutions to bolster operations and reduce costs.

Tersigni said the system expects to save $57 million annually through pay alignment practices, which involve using common benchmarks and eliminating inconsistencies. The system has adopted staffing models and productivity standards for nurses and other caregivers that align across facilities in the system.

Meanwhile, Ascension has made big investments in its ancillary businesses, such as Ascension Ventures and R1 RCM, which works on revenue cycle. In addition, Ascension is working with other health systems to create a generic drug company.

"We are in the midst of major transitions, not only in how we provide care, but in how we are reimbursed for the services we provide," Tersigni said (Kacik, Modern Healthcare, 3/22). 

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