Q&A with Rhonda Mundhenk, Interim CEO of Lone Star Circle of Care

A Q&A with Rhonda Mendhenk, Interim CEO, Lone Star Circle of Care



BACKGROUND



When did you join Lone Star Circle of Care?



I joined in May 2012.



Before you were named interim CEO, [what was your title]?



I was chief operations officer of the clinical system. That was how I came into the organization, and then I became CEO of the clinical system in January of this year. Those would be my two positions with lone star prior to the interim.



Tell me a little bit about the process about how you were approached to be interim CEO?



I was called on a Saturday, I believe, and notified that the board would like me to step up into the position. I thought about it for some time and then agreed.



EXPANSION



How did we get here?



I think for about a year and a half, Lone Star has made a series of investments in population health strategies, those involved information technology, clinical expansion and navigation services. Those were the three big buckets of costs.



They were all built and designed toward new types of health care arrangements and payment reform. Unfortunately none of the things that those were intended to do came to fruition in a timely manner.



I noticed that from your documents that a lot of your cash comes from Medicaid, Medicare and the various federal reimbursements. Was that the area from where the reform was going to come from?



No. those payment sources are part of the Federally Qualified Health Center, and the FQHC are reimbursed in a very particular way. Any sort of creative payment reform systems that were attempted would have had to have occurred outside of the FQHC because of its reimbursement structure. That was the reason for the clinical expansion that were not part of the FQHC.



Can you tell me about the change in the reimbursement?



Because a FQHC has a specific reimbursement, its already a set reimbursement path. Theres really no room to do any experimenting within that design. It is as it is, as its defined.



If you are interested in developing a new payment reform model, you almost need to develop a parallel system if you are a FQHC that allows you to do that. This was the attempt to develop the parallel system which could then do things like contract for risk, saying well take on some of the risk of the care for this patient.



It could have been pay for performance. If we do very well with this patient, then you pay us this. If we dont, then you pay us that. That could be married with a risk model in that if we do not do as well as were going to do, then you are going to pay us this as opposed to a higher amount.



There are many ways that this deal could have come structured together to produce a different kind of payment for healthcare reform that was not contemplated under the model of a FQHC.



To do that, you need clinics. You need population. You need technology to understand where they are going, what they are doing and what their costs are. You require navigation, being able to send those patients. These are the services I want you to use. I want you to go see this specialist and not this specialist.



It takes a different approach, a different infrastructure to be able to realize the shared savings that we could have achieved under a different model.



Is there any way to quantify what percentage of the budget that would have been, [the part that would have been the reform]?



It was a major component of the budget. The investments made in that reform, yes. so we never actually got to a different structure payment for those services, but we certainly developed the infrastructure that we needed to run a payment reform model.



Having looked at it, when would that have come online? When would that have caught up had everything worked out?



I dont know if there is a timeline that I could give you. Those were relationships that were pursued outside of the clinical system, and I dont know the intended timeline of those agreements coming in would have been. They were supposed to imminent, but not imminent enough.



Were the costs coming in and the funding was not there yet?



Current health care reimbursement does not contemplate a lot of these kinds of things. Its fee for services: you take care of the patient, you are reimbursed and it doesnt matter at the end of the day what those patient outcome measures wereits the same fee. It is fairly straightforward from that perspective.



On the other side of the equation, If you had had different models of payment reform, in other words, contracts with various payers that would pick up those costs and say yes, roll all of this in as a new model, here is the new payment reform model and move forward from there, that was the thought in terms of what would have paid for those types of investments.



The only thing that would have paid for those types of investments is a newly contemplated model of payment reform.



So it sounds like there was expansion and the finances could not catch up with the expansion. Is that accurate?



That is correct. Certainly you had a large buildup of capital and related expenses that was sort of created during the population health expansions.



Yes, when you didnt have payment for them that came through to support those initiatives, then you ran into the cash crisis that we are presently in.



So in order to have expenses meet revenues, expenses had to be cut.



Yes, we had to eliminate all of those initial expenses in order to fall back in line with a FQHC cost structure.



RESTRUCTURING



Were the things that were taken away the things that were added or were different things removed to get back to square one?



Overwhelmingly they were the things that were added. over and above what the core business needed. Certainly, many of these things were luxuries. They were nice things to have clinically, but when you have to look at your cost structure, they were things that ultimately we couldnt afford.



Now the dental obviously is part of the core FQHC. Optometry is not a required service but it is clearly a service that underserved people need in Williamson County. There were some casualties in what you would call the traditional clinic system. All of those decisions have been made with a laser focus on sustainability for the majority of patients and services.



My understanding is that you had 599 employees prior to this?



Before anything happened?



The most recent information that I saw was the 2012 tax information and that was 599.



We had just above 660.



When was that, ballpark, beginning of this year?



April.



One of the things have heard casually is the characterization that LSCC grew too fast. How would you respond to that characterization?



I would say in the last year and a half with the out-of-scope expansions that we did, they were certainly ambitious.



What was some of the reasoning behind that? Had that worked, what would have been the advantage of that?



I think the advantage to that would have been we would have developed a more efficient and more effective version of health care and that certainly would have benefited the patients that we provide care to. The motive was a good motive.



FINANCIAL CRISIS



Obviously once the numbers didnt add up, there had to be some difficult decisions about how to get back to balance. Can you tell me about that process and how do you make those choices?



Sure. You have to access the overall financial state of the organization both from a short term standpointfrom the position that we were sitting inand in the long term.



We had to layer on top of that the required services that the Bureau of Primary Health Care and [the Health Resources and Services Administration], the federal organizations that govern Federally Qualified Health Centers so we had to layer on top of that the requirements that HRSA has to so we stay in compliance with those.



Then we simply starting going through and looking at we needed to do to reduce our size. While all of this has been difficult, clearly the expansions that have grown up outside of the core operating model, those were the first things that we looked at because those arrangements had not come to fruition. Therefore there was additional support there that was not needed by the core system.



That was the first place that we looked. Reductions in force mirrored this. The second thing that we looked at was closer to the core of the clinical system and the third piece was short term, where are we at right now, what can we carry to get through this difficult patch and get back on our feet? That was really the purpose of the third reduction.



How will you know if you have gotten out of that rough patch ...?



Obviously when you take actions like this it takes a while to realize itself in terms of your financial position. People will know we are through the woods once we are able to have the benefit of everything that weve done in a very short period of time to stabilize the organization come through in terms of cash flow. Thats the light at the end of the tunnel for us.



Have we hit the bottom?



I certainly hope so. [Which I say] simply because I cannot predict the future.



So you do not anticipate any further layoffs?



Circumstances can change. Certainly I have no crystal ball to predict the future. but I think with everything we know today, we have taken all of the actions that we can to stabilize the organization and we are looking forward to climbing out.



One thing i found interesting is that in nonprofits ... is that revenues do not necessarily have to match expenses because of grant funding and additional contributions, additional sources of income other than [patient fees]. Is that characterization true and how does that work in the LSCC model?



Most FQHCs, because you are providing care to a large number of uninsured patients in markets where normal healthcare providers wont go, theres never a break-even assumption. You are always looking for additional operating revenue outside of your patient revenue to support your core operations. LSCC is no different in that regard. You have to have non-operating revenue in addition to our patient revenue to make the bottom line.



CENTEX



Regarding the IT aspect of [the population health strategies], you are referring to Centex?



Yes, Centex.



How many people did Centex employ?



[There were 56 Centex staff prior to May 1 and now there are 13 remaining Centex staff, according to LSCC.]



Can you tell me a little bit about the things that Centex did?



They provided essentially affordable electronic medical records support. They provided some support to the community health information exchange. and they provided customization service for electronic medical records for the safety net system.



That had been a pretty significant achievement/goal of LSCC to move to an electronic record system.



Its important. ERM is important because it allows you to participate in health information exchange, which is one of the goals of the accountable care act and where health care is trying to go. It is trying to make the exchange of information between providers easier and more seamless and more effective.



It also allows you to run your business metrics more efficiently. because if you dont have an electronic medical record, you cant query it, you cant report it. You have to rely on manual auditing. its tiresome and tedious, and only gives you a slice of your system. It doesnt allow you to look universally. ERM is certainly a good thing to have and is certainly a direction that everyone in health care is being pressed.



Some of that system remains. Part of Centex is still intact, yes?



Correct.



That was both as FQHC as well as part of the transition to ACA being a coordinated system is quite an advantage and quite a [focus]. Can you speak about the goals of becoming more coordinated and patient-centric?



One of the things you want to ensure for patients is that we are a primary medical home. So obviously we dont provide the full continuum of care that a patient may need. If a patient needs to be hospitalized, if a patient needs to go to an emergency department, if a patient needs rehabilitation, if a patient needs followup acute care, being in a hospital. these are not services that LSCC as an entity provides.



What behooves us in creating optimal outcomes for that patient is making sure that at every step of that process, care is coordinated. Information is fed out from the primary care system and information is fed back in from the places that that patient has been. So all of these developments in it technology, navigation, those were all attempts to ensure that we could coordinate care for patients across a continuum to get the things that they need.



LAYOFFS



Of some of the various layoffs that occurred, did any of them occur at Centex, the ones that happened in May?



Yes, a good number of them did.



I understand the initial cuts were related to administration in the first round.



Administration and technology. Centex would have been a part of that as well.



Moving into the second and third rounds in May, we started to see more clinical closures and reductions in services?



Uh-huh. In the second round of cuts, those were primarily related to our out-of-scope clinics. Out of scope clinics were the clinics that were put together to do these population health initiatives. They couldnt be part of the Federally Qualified Health Center, because the FQHC has a specific reimbursement formula that wasnt going to change. When you are seeking payment reform, you need a different clinical system that is going to be able to implement those. That would be the second round [and] that would be Stassney and Riverside.



Stassney used to be part of Carousel [Pediatrics]. Was Riverside?



Yes.



Was there a third?



Capital Plaza, and that is winding down. So it is part of that third round.



When in June was it going to go?



At the end of June.



Has there been any plan made for the patients and the patient populations at those three clinics, suggested paths to go?



Absolutely. We followed up will all of our patients that were scheduled at those clinics, we offered them obviously referrals to other Lone Star sites that are available. If there is no Lone Star site available, obviously we will refer them to nearby providers. Continuity of care is important.



Do you have any numbers as to the number of patients that the various closures, the vision, the dental, would affect as part of your system?



We are at about 345,000 annual encounters prior to all of this occurring. and well dial down to just north of 300,000 encounters.



REBUILDING AND LOOKING AHEAD



You mention sustainability. where is Lone Star going? what is the path out of this?



I think we have excellent providers. We have excellent staff and we have services and a market and patients that are in need of care. All of these things bode well for the organization.



Our partners are supporting us during the process, so that is a critical piece. I think we have done the vast majority of the work that we need to do to get to a sustainable model. There may obviously still be a little bit of work we need to do but we have done a lot of work to get there and we looking forward to getting back to our core business and core mission of taking care of patients in Williamson county, Travis county and the surrounding counties and communities that we serve.



My understanding is that Lone Star has been reaching out to its partners and friends during this financial crisis. Are there any results at this time that can be shared from those discussions?



Not at this time, but I think that relatively shortly, we might have something to say about that.



Are you going to merge with anybody?



We have no plans to do that at this time.



How is the clinic in Bastrop is doing?



The clinic in Bastrop will open in early spring. Its being completed. It hasnt been placed in production yet.



[Can you walk me through the most recent information about the clinics that are closing?]



Theres one in Texas A&M University, our hub there. That is the OB/GYN clinic there. Those staff there has been transferred to other locations. The provider staff there have been transferred to other locations. so its a consolidation of operations there.



Optometry and vision services, we have eliminated that in its entirety. That was only operating out of one site, the Lake Aire [Medical Center hub] site here in Georgetown. We call them hubs when we have several clinics at the same address.



Dental services were significantly reduced but they continue to operate in a limited capacity at our lake aire hub as well.



[Regarding] School-engaged services, we closed clinics in Hutto [ISD], Elgin ISD. We are looking to transition services in San Marcos and Austin ISD.



How many schools are in the one in Austin ISD?



There are seven. Six were part of a [Delivery System Reform Incentive Payment] project [which is part of the 1115 Medicaid Waiver].



Do you anticipate any more layoffs?



We need to continue to evaluate where we are and obviously make all of those decisions in the interest of preserving access to care. We think we have done a good job at getting our costs down and we are approaching a sustainable model.



GEORGETOWN



My understanding is that there was a project where the City of Georgetown gave LSCC money to work on its headquarters and as part of that there was job creation and job retention. With some of the layoffs, i know your reporting is not until September, where does that leave LSCC?



I think we will be well above where we are required to be.



WILLIAMSON COUNTY



LSCC is part of the safety net in both Williamson and Travis [counties]. My understanding is that it is the largest provider of uninsured, underinsured and Medicaid patients in Williamson. what does this mean for healthcare in Williamson County?



The survival of Lone Star Circle of Care as a system is essential for uninsured and underinsured people in Williamson County. There is not another large ambulatory care provider that provides care on a sliding scale basis to these individuals. This is where they have come to rely upon, receiving high quality care. this is their health care home.



[How do you respond to rumors of financial mismanagement or misuse of funds?]



I have seen nothing in my tenure of working at this that would suggest that.



[Pete] Perialas started as the CEO and had been the position for a long time. He retired just as this whole thing [began]. Have you had any conversations with him?



No.



If you had an opportunity to speak to residents, the folks who have watched you guys grow, patients, families, our readership, what would you say to them?



I would say we still have excellent staff. We still have excellent services and we look forward to continuing to be your health care home because we know that many of you rely on us. We intend to be there.