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By Kenneth Kaufman
When it comes to equity, healthcare organizations face three different and very difficult challenges: health disparities among patient populations, income inequality in the healthcare workforce, and of diversity in the C-suite and the boardroom. To get the job done, you have to tackle all three. And that takes an uncommon—even selfless—type of leadership. In his decision to retire from coaching, Tampa Bay Buccaneers head coach Bruce Arians showed what that kind of leadership looks like. If you follow football, you know that Arians’ retirement announcement came as a surprise, if not a shock, to the NFL community. With a stellar 80-48-1 career win-loss record, a Super Bowl victory in 2021, and the recent return of superstar quarterback Tom Brady, Arians had good prospects of coaching the Bucs to another Super Bowl victory this year. That would have virtually assured his ascension to the Pro Football Hall of Fame. But Arians had a different kind of legacy in mind. After assembling one of the most diverse staffs in football, Arians saw an opportunity to elevate defensive coordinator Todd Bowles, his handpicked successor, at a time when the Bucs were poised for success. Surely it was clear to Arians that no one is tackling the abysmal diversity hiring record in the NFL in a meaningful way despite the recent lawsuit alleging discriminatory hiring practices by the league. Of 500-plus head coaches in the NFL since its inception in 1920, just 24 were Black and most of those held interim positions. Bowles is one of only four Blacks who are currently working as a head coach. Arians saw an opportunity to be part of the solution and he seized it. He timed it when the team was well situated, knowing that Black head coaches rarely get the second chances with other teams that whites do when their teams don’t succeed. Solving equity—whether in football or in healthcare—requires having the right values, making the right decisions, and implementing those decisions. By his actions, Arians came through on all counts. He went a step further by recognizing that it’s not enough to give people from underrepresented groups a chance; they need and deserve a chance to succeed. The NFL was supposed to have a structural solution for diversity in the head coaching ranks. The Rooney Rule, established in 2003, required that any NFL team with a head coach opening must include at least one diverse candidate among its slate of interviewees. I think everyone would agree that the Rooney Rule has been a failure—that including a diverse candidate did not create a situation in which a minority candidate was actually hired and, when hired, was successful. In the absence of a structural solution for diversity among NFL head coaches, Arians substituted his own personal level of leadership. The NFL is not alone in this regard. No industry vertical has come up with that solution, including healthcare. While we continue to look for those structural solutions, the kind of strategic leadership shown by Arians appears to be the way forward. Healthcare leaders can take a page from Arians’ playbook to address all three types of equity challenges in healthcare. Health disparities. People in healthcare circles have been talking about the zip code effect for years. Zip code is a proxy for a series of health inequities that have plagued marginalized communities of color for decades, affecting a person’s health and life expectancy more than any other factor. Soon after the COVID-19 pandemic began, it became clear that Blacks and Latinos were being hospitalized and dying at much higher rates than whites. At that point, it became impossible to rationalize health disparities any longer. Income inequality. About 4.5 million people working in healthcare settings are considered low-wage workers, defined as the bottom 20% of wage earners. Deemed essential workers during the pandemic, they include nursing assistants and aides as well as environmental services, laundry and food service workers. These frontline workers, who are disproportionately female, Black and Latino, are not compensated at a level that they can effectively manage within our economy. The pathway to income equity for these workers remains unclear. Diversity in leadership. At the C-suite level, progress in improving diversity has been slow. An analysis of leadership diversity in 100 leading hospitals found that only 6% of CEOs were Black. Just 18% of hospitals had at least one Black leader in a common C-suite role. The highest percentage of Black leaders in a C-suite role was in diversity/equity. Women are also under-represented at the executive level. Although they hold three-quarters of healthcare jobs, only 15% of healthcare organization CEOs are female. If you want to move the needle on diversity, having the right values is the starting point. But unless you make decisions based on those values and implement those decisions strategically, as Bruce Arians did, we will be having the same conversations about healthcare equity in five years that we’re having now. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success!
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By Kenneth Kaufman
In behavioral economics, the sunk cost fallacy describes the tendency to carry on with a project or investment past the point where cold logic would suggest it is not working out. Given human nature, the existence of the sunk cost fallacy is not surprising. The more resources—time, money, emotions—we devote to an effort, the more we want it to succeed, especially when the cause is an important one. Under normal circumstances, the sunk cost fallacy might qualify as an interesting but not especially important economic theory. But at the moment, given that 2022 will likely be the worst financial year for hospitals since 2008 and given that the hospital revenue/expense relationship seems to be entirely broken, there is little that is theoretical about the sunk cost fallacy. Instead, the sunk cost fallacy becomes one of the most important action ideas in the hospital industry’s absolutely necessary financial recovery. Historically, cases of the sunk cost fallacy can be relatively easy to spot. However, in real time, cases can be hard to identify and even harder to act on. For hospital organizations that are subsidizing underperforming assets, identifying and acting on these cases is now essential to the financial health of most hospital enterprises. For example, perhaps the asset that is underperforming is a hospital acquired by a health system. (Although this same concept could apply to a service line or a related service such as a skilled nursing facility, ambulatory surgery center, or imaging center.) The costs associated with integrating an acquired hospital into a health system are typically significant. And chances are, if the hospital was struggling prior to the acquisition, the purchaser made substantial capital investments to improve the performance. As time goes on, if the financial performance of the entity in question continues to fall short, hospital executives may be reluctant to divest the asset because of their heavy investment in it. This understandable tendency can lead the acquiring organization to throw good money after bad. After all, even when an asset is underperforming, it can’t be allowed to deteriorate. In the case of hospitals, that’s not just a matter of keeping weeds from sprouting in the parking lot. The health system often winds up supporting an underperforming hospital with both working capital and physical capital, which compounds the losses. And the costs don’t stop there, because other assets in the system are supporting the underperforming asset. This de facto cross-subsidy has been commonplace in hospital organizations for decades. Such a cross subsidy was probably never sustainable, but it is even less so in the current challenging financial environment. This is a transformative period in American healthcare, when hospital organizations are faced with the need to fundamentally reinvent themselves both financially and clinically. The opportunity costs of supporting assets that don’t have an appropriate return are uniquely high in such an environment. This is true whether the underperforming asset is a hospital in a smaller system, multiple hospitals in a larger system, or a service line within a hospital. The money that is being funneled off to support underperforming assets may be better directed, for example, toward realigning the organization’s portfolio away from inpatient care and toward growth strategies. In some cases, the resources may be needed for more immediate purposes, such as improving cash flow to support mission priorities and avoiding downgrades of the organization’s credit rating. The underlying principle is straightforward: When a hospital supports too many low-performing assets, the capital allocation process becomes inefficient. Directing working capital and capital capacity toward assets that are dilutive to long-term financial success means that assets that are historically or potentially accretive don’t receive the resources they need to grow and thrive. The underlying principle is a clear lose-lose. In the highly challenging current environment, it is especially important for boards and management to recognize the sunk cost fallacy and determine the right size of their hospital organizations—both clinically and financially. Some leadership teams may determine that their organizations are too big, or too big in the wrong places, and need to be smaller in order to maximize clinical and balance-sheet strength. Other leadership teams may determine that their organizations are not large enough to compete effectively in their fast-changing markets or in a fast-changing economy. Organizational scale is a strategy that must be carefully managed. A properly sized organization maximizes its chances of financial success in this very difficult inflationary period. Such an organization invests consistently in its best performing assets and reduces cross-subsidies to services and products that have outlived their opportunity for clinical or financial success. Executives may see academic economic theory as arcane and not especially relevant. However, we have clearly entered a financial moment when paying attention to the sunk cost fallacy will be central to maintaining, or recovering, the financial, clinical, and mission strength of America’s hospitals. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
One of the COVID pandemic’s most bitter lessons has been the complete inadequacy and dysfunction of the U.S. public health system, if the word “system” can even be applied. Prior to COVID, these shortcomings were hiding in plain sight. Now, they are evident to all and exacerbated as the nation struggles to protect the health of its citizens in the face of a pandemic entering its third year. At the outset of the pandemic, research showed a $4.5 billion funding shortfall to provide what authors of a study in The Milbank Quarterly called “a minimum standard of foundational public health capabilities.” Further, more than 85% of public health funding comes from state and local sources, leading to significant variation by geography. For example, states including New York, New Hampshire, and Montana spend more than $129 per person to public health, while states including Nevada, Missouri, and Indiana spend less than $59. This geographic variation in funding indicates a significant inequity in the types and levels of public health services. Certainly, the existing public health infrastructure did not protect historically vulnerable populations from the effects of COVID, with Hispanic and Black individuals at least twice as likely to die from COVID as whites and almost three times as likely to be hospitalized, according to a Kaiser Family Foundation analysis of CDC data. Public health agencies also suffer from chronic understaffing. In the decade prior to COVID, state public health agencies lost 16% of their full-time positions, and county and city public health agencies lost 20% of their positions in the past 15 years. The result has been an inadequate, unequitable, and fragmented collection of services that, when COVID hit, was unable to deliver what the country desperately needed: prompt, consistent, and widespread testing and vaccination; effective contact tracing; and clear communication with the public about healthy practices. The politicization of health has made a bad situation worse. As of September 2021, 26 states passed laws that limited public health powers, and 303 state and local public health department leaders resigned, retired, or had been fired. Hospitals have always been the organizations that truly matter when it comes to healthcare delivery. And now, highlighted by COVID, hospitals have become the organizations that truly matter when it comes to public health. Consider some of the core services of public health, as defined by the CDC:
The slow but inexorable shift of financial risk from insurers to providers has created the economic incentive for hospitals and health systems to better understand population health status and the specific factors that influence it; to enhance access to care particularly in underserved areas; and to reach out into communities to manage health risks before they produce the need for more intensive levels of intervention. Perhaps more important than economic incentive has been the mission incentive of not-for-profit providers. Almost universally, not-for-profit hospitals and health systems articulate a mission to improve the health and wellbeing of communities. Increasingly, this mission has led hospitals into the challenging public health arena. The COVID crisis has taken these new health system responsibilities to a different level. Health systems were instrumental in developing and administering COVID tests, tracing COVID’s path, educating communities about the virus and how to avoid it, and providing front-line care for the huge swath of Americans affected by the virus. Moving forward, hospitals will be asked by communities all over the country to be the organizations that deal with a broader set of national problems related to the wellbeing of patients and communities—problems that COVID has made much worse, problems that the public sector has never been able to solve. With this new set of responsibilities comes an entirely new set of strategic, operational, and financial implications for hospitals and health systems. Meeting these challenges will require a new level of health system ideas, a new level of health system aggressiveness, and a new level of health system ambition. More than ever, health systems will need to have to address social determinants of health; access and analyze data about health conditions, reimagine access to preventive care, develop care models tailored to specific populations. The costs will be enormous, and the need for intellectual capital considerable. America is looking to someone or something to take on what is now a paramount set of national healthcare problems. It is up to the hospital sector to bring its charitable mission, its resources, and its passion to bear on this awesome responsibility. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
In February, U.S. inflation as measured by the Consumer Price Index grew 7.9% year-over-year, the highest increase in four decades. The factors influencing the current inflationary environment are many and interconnected, including supply chain disruptions, infusions of stimulus money, pent-up demand for goods and services, and more recently, the war in Ukraine and the resulting economic sanctions for Russia. And while the entire global economy has been affected by the current inflationary period, the challenges facing U.S. healthcare providers are particularly pronounced. Many of the household items that have risen in price—from gasoline to food prices—are likely to stabilize and even decline with time. Unfortunately for hospitals, however, skyrocketing labor costs will likely result in a sustained structural reset of their expense base—at least until the emergence of offsetting workflow restructuring or technology solutions. In February, hospitals’ labor expense per adjusted discharge rose a staggering 32% from February 2020, immediately prior to the onset of the COVID-19 pandemic in the United States, and was 15.3% up from February 2021, according to the most recent Kaufman Hall National Hospital Flash Report. Beyond rising salaries, hospitals are also faced with shortages of all types of workers in multiple departments—from nursing to environmental services. With U.S. unemployment rates nearing all-time lows, hospitals must now aggressively compete with every employer in their communities for entry-level workers. Some economists predict worker shortages and related higher costs will persist for decades to come. And in contrast to similar positions in other industries, even entry-level healthcare workers require significant training before they are prepared to work in a hospital. The very nature of hospital employment is also shifting rapidly. In February, the median contract labor expense as a proportion of U.S. hospitals’ overall labor expense in U.S. hospitals reached approximately 12%—up from roughly 2% as recently as October 2020, according to Kaufman Hall data. And while many hospitals may view travel nursing primarily in terms of cost, it’s possible that a sizeable percentage of the nursing workforce—including younger Millennial and Generation Z workers—will prefer the lifestyle flexibility of travel nursing for years to come. In all likelihood, the current workforce challenges will require a new set of solutions to complement efforts to increase productivity and optimize a given hospital or health system’s workforce. The current combination of broader macroeconomic pressures and workforce shortages with the specific inflationary pressure in the healthcare workforce has created a perfect inflationary storm. More than ever in the past, hospital leaders must be able to develop a clear organizational point of view about the near-term and then systemic implications of inflation and other macroeconomic forces. If an organization believes we are in a long-term expense restructuring cycle, that will suggest one set of resource management decisions. If an organization believes that inflationary pressures will be more muted or short-term, that would suggest a different set of decisions. For example, if an organization is contemplating the need to issue additional debt, and if the organization believes inflation will be long-term, the organization should move as quickly as possible to issue fixed-rate debt to defend against the prospect of rising interest rates. On the other hand, if an organization believes that inflation will be temporary, it could be more deliberate about issuing debt and might assess structuring options that trade the possibility of lower cost for the retention of interest rate risk. Moving forward, hospital financial planning exercises should include a careful assessment of what the future might hold for their organizations and the broader industry climate, including:
While some of those pressures may ease with time, rising labor costs and ongoing workforce shortages indicate a lasting, structural change in expenses is in the offing. Hospitals seeking to remain resilient through this perfect inflationary storm must be able to clearly assess the broader macroeconomic forces influencing their organizations, integrate those assessments with their existing financial planning frameworks, and allocate resources accordingly to protect their organizations from future shocks. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
One of the COVID pandemic’s most bitter lessons has been the complete inadequacy and dysfunction of the U.S. public health system, if the word “system” can even be applied. Prior to COVID, these shortcomings were hiding in plain sight. Now, they are evident to all and exacerbated as the nation struggles to protect the health of its citizens in the face of a pandemic entering its third year. At the outset of the pandemic, research showed a $4.5 billion funding shortfall to provide what authors of a study in The Milbank Quarterly called “a minimum standard of foundational public health capabilities.” Further, more than 85% of public health funding comes from state and local sources, leading to significant variation by geography. For example, states including New York, New Hampshire, and Montana spend more than $129 per person to public health, while states including Nevada, Missouri, and Indiana spend less than $59. This geographic variation in funding indicates a significant inequity in the types and levels of public health services. Certainly, the existing public health infrastructure did not protect historically vulnerable populations from the effects of COVID, with Hispanic and Black individuals at least twice as likely to die from COVID as whites and almost three times as likely to be hospitalized, according to a Kaiser Family Foundation analysis of CDC data. Public health agencies also suffer from chronic understaffing. In the decade prior to COVID, state public health agencies lost 16% of their full-time positions, and county and city public health agencies lost 20% of their positions in the past 15 years. The result has been an inadequate, unequitable, and fragmented collection of services that, when COVID hit, was unable to deliver what the country desperately needed: prompt, consistent, and widespread testing and vaccination; effective contact tracing; and clear communication with the public about healthy practices. The politicization of health has made a bad situation worse. As of September 2021, 26 states passed laws that limited public health powers, and 303 state and local public health department leaders resigned, retired, or had been fired. Hospitals have always been the organizations that truly matter when it comes to healthcare delivery. And now, highlighted by COVID, hospitals have become the organizations that truly matter when it comes to public health. Consider some of the core services of public health, as defined by the CDC:
Perhaps more important than economic incentive has been the mission incentive of not-for-profit providers. Almost universally, not-for-profit hospitals and health systems articulate a mission to improve the health and wellbeing of communities. Increasingly, this mission has led hospitals into the challenging public health arena. The COVID crisis has taken these new health system responsibilities to a different level. Health systems were instrumental in developing and administering COVID tests, tracing COVID’s path, educating communities about the virus and how to avoid it, and providing front-line care for the huge swath of Americans affected by the virus. Moving forward, hospitals will be asked by communities all over the country to be the organizations that deal with a broader set of national problems related to the wellbeing of patients and communities—problems that COVID has made much worse, problems that the public sector has never been able to solve. With this new set of responsibilities comes an entirely new set of strategic, operational, and financial implications for hospitals and health systems. Meeting these challenges will require a new level of health system ideas, a new level of health system aggressiveness, and a new level of health system ambition. More than ever, health systems will need to have to address social determinants of health; access and analyze data about health conditions, reimagine access to preventive care, develop care models tailored to specific populations. The costs will be enormous, and the need for intellectual capital considerable. America is looking to someone or something to take on what is now a paramount set of national healthcare problems. It is up to the hospital sector to bring its charitable mission, its resources, and its passion to bear on this awesome responsibility. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
For a very long time, hospitals have been organized around three principles that inform the way they run their organizations, and how they conduct themselves in the management suite and the board room. The first principle is the desire to maintain organizational control. This principle has come about in large part because the clinical enterprise is inherently risky. Therefore, leaders do not want to be in a position where they don't have control of the clinical enterprise. That principle has extended beyond specifically clinical matters to all aspects of operation. Maintaining organizational control has come to mean minimizing organizational risk. The second principle, which goes along with the first, is to minimize enterprise risk. Hospitals have always been very risk-averse organizations. Over time, as different concepts have been introduced, organizations have had to be talked into doing things that allowed more risk, and that could result in better financial results from that risk or better strategic results from that risk. The third principle is maintaining operational flexibility. Management teams and boards don't want to get caught in a box when difficult or bad things start to happen. This has to do with the public and reputational notion of running a hospital. Management and boards want to have the operational flexibility to take the actions necessary to resolve any situation that could harm the reputation of the organization. These three principles are all well and good, but they have to be maintained and enforced. And it is expensive to maintain control, minimize risk, and maintain maximum operating flexibility. In general, leaders may believe that these very high levels of healthcare cost come from the way provider organizations are run. But that’s not true. Leaders make decisions every day in which they actually pay to allow those three principles to be in full flight. Let’s look at a metaphor for this situation. If an organization is focused on maintaining control and eliminating to the greatest extent possible the externalities that limit control and increase risk, then when it comes time to finance, that organization will tend to look toward a 30-year fixed-rate transaction, because that transaction eliminates the risks of externalities. However, if an organization wants to lower the costs of that transaction, the organization would do a variable-rate transaction or use certain hedging strategies. But getting those lower costs invites in the externalities of the world—the kind of externalities we saw in 2008 and 2009. So management teams and boards that don’t want to bring in those externalities look toward a 30-year fixed rate transaction at a higher cost. This is a metaphor for all the other operating decisions that a hospital makes. If an organization’s approach is to eliminate risk to the degree possible, and the leaders apply that approach to all their decisions, then the organization can purchase that increased control and minimized risk. But those decisions will result in higher costs. We have recognized for many years that not-for-profit healthcare is expensive. There is a fundamental philosophical reason for that situation. Organizations are trying to maximize the principles of maintaining control, minimizing risk, and maximizing flexibility, and they are paying up to do that. There are hundreds of examples of situations in which organizations have to decide: Do we enforce these three principles? Or do we back off these three principles in order to reduce the overall costs of running the organization? However, if we continue to proceed on this operating philosophy, we will continue to have the high operating costs that are directly correlated with that operating philosophy. If we want to get to a healthcare system that has a different operating cost point, then we have to rethink these operating principles. Also, these operating principles create a perspective in which the needs of the organization are given a higher priority than the consumer’s needs. That’s the opposite of what a company like Amazon does. Amazon’s mantra is, first figure out what the consumer needs, and then figure out what Amazon does. When you insist on organizational control and low enterprise risk, the decisions that are being made in the board room are being made on behalf of the organization, and never really on behalf of the consumer. And that’'s a very unfortunate competitive place to be right now. This is just not the way the American economic model works anymore. The dominant model is the way that Apple, Microsoft, and Amazon behave every day. And in the past year, the dominance of that model has dramatically accelerated. Now, in order for healthcare organizations to take advantage of certain critical opportunities, they are going to have to accept less control, to take more risk, and to reduce their operating flexibility. In particular, that will be necessary in order to reduce cost materially. We’ve picked almost all the low-hanging fruit when it comes to costs, but costs are still too high. And that’s because now we have to attack the operating principles in order to reduce costs more. Next, hospitals will need to take a truly consumer-first attitude. Research shows that what consumers really care about is how they feel as they walk away from the interaction. Not how they felt when they first got there. Not how they felt while the transaction was happening. It's how they feel about the last mile. This has not been an area of focus for healthcare organizations. That last mile may be smooth from the hospital’s perspective, but is the consumer truly happy when the encounter ends? For a company like Amazon, there is an extraordinary focus on making that last mile better and then better still. The changing American economic model is incredibly fluid right now. It’s highly dependent on technical competency and accumulated intellectual capital. Why has Amazon been so extraordinarily effective during the pandemic? Because they accumulated this extraordinary technical competency and this unbelievable intellectual capital, and then they were able to combine that competency and capital, and roll it out during the pandemic. And that was what consumers wanted. Which is why Amazon’s revenue was up 40% in the first quarter of the pandemic and while performance metrics fell through the floor for businesses using traditional business models, or businesses without the necessary technical competency and intellectual capital. Hospitals don't have the technical competency and accumulated intellectual capital to be truly competitive in the dominant economic model. So hospitals will need to be open and experimental about possible partnerships and joint ventures to get that technical competency and intellectual capital. There are so many strategic needs and opportunities in healthcare now. The need to deliver a better experience to consumers. The need to reduce operating costs. The need to integrate digital health into the care process. It's naive to expect that the average American hospital could do all these things themselves, which means that there are going to be many kinds of joint ventures and partnerships to accomplish these things. But in order to do those partnerships and joint ventures, it’s inevitable that hospitals will have to accept less control and take much more risk, and accept reduced flexibility. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
In the roughly 19 months since the COVID-19 pandemic emerged, America’s hospitals have borne a huge amount of the pressure and accountability for managing the effects of an unknown and unpredictable virus, and more recently for the complex process of disseminating vaccines. Our nation’s hospitals are doing all of this with relatively little public or political credit, and at great expense to overworked staffs and organizational financial health. And now perhaps, if we are fortunate, we may be starting to come out of the worst of COVID. However, for hospital executives and their boards the question is: coming out into what? How will post-COVID America, its economy, and its culture affect the relative strengths of traditional healthcare provider organizations? And, with COVID having greatly accelerated the growth of virtual business models, how will COVID affect basic patient care delivery and the encroachment of non-traditional competitors on that traditional delivery system? In the absence of clear answers to questions such as these, hospitals and health systems need to prepare for many paths to many alternate strategic scenarios. This preparation will require sophisticated analyses and high level discussion at both the management and board levels. The overall strategic considerations are likely to be the most complex and intricate that healthcare providers have wrestled with in contemporary times. To assist with this strategic re-consideration, I offer the following post-pandemic preparation checklist. Costs. Every hospital and health system has come through COVID differently. Depending on the speed and absolute degree of the return of volumes and revenues, the pre-COVID cost structure still in place at many hospitals may require significant reductions. Given the general economic insecurity in towns and cities across America, any such cost reductions will need to be accomplished in a most thoughtful way. Strategic Repositioning. What does the local and regional market now look like? What about new competitors from national companies? What does your health system portfolio now look like? Are there specific assets within the portfolio that have been damaged? Has overall competition changed? Have direct competitors been weakened or become more aggressive? Are non-traditional competitors making moves into your marketplace? Organic Growth. Do opportunities for organic growth remain in your market? How might COVID have created new opportunities? Inorganic Growth. A competitive marketplace damaged by COVID may offer new and real opportunities for inorganic growth. Inorganic growth, however, always requires unusual levels of both preparation and organizational aggressiveness. Partnerships. The post-COVID environment may create and era of transformative partnerships. Last month, 14 large health systems announced a partnership to create a large-scale database to revolutionize disease prevention and treatment. Just a few days ago, Amazon Care, Ascension, and Intermountain Healthcare announced a coalition to promote care in the home through telehealth, digital therapeutics, and provider home visiting. Hospital and health system executives will need to be attentive and alert to such innovative partnership opportunities and their potential competitive impacts. Telehealth. What is the position of telehealth in your market post-COVID? What is your own level of telehealth capability? How will telehealth impact your overall delivery system and possibly the competitive balance in your marketplace? Importantly, what is your organizational point of view relative to the role of telehealth in your post-pandemic delivery system? For some time we may be in an economic, cultural, and clinical condition where we have many more questions than answers about organizational direction in the post-COVID environment. This suggests that any generic roadmap to the future remains unlikely to impossible. Preparation, though, is both possible and essential. Only with precise and well-thought-out strategic and financial assessment and direction can complex healthcare organizations reasonably expect to navigate the post-pandemic fog. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
A very interesting short article recently appeared in The New York Times that explored the COVID phenomenon of “languishing.” The author defines languishing as “the collective fog we have endured…trouble concentrating, trouble staying motivated, trouble getting excited about the future.” The author goes on to say that languishing isn’t burnout and is not depression, but instead is a sense of stagnation, a sense of just getting by. As I read the article it occurred to me that not only can individuals languish, but most certainly organizations can languish too. And if any organizations in America deserve to languish, certainly America’s healthcare providers qualify. This notion of a long-standing collective funk introduces an entirely new fiduciary responsibility for hospital boards and CEOs. The past year has been unprecedentedly difficult; every organization, especially hospital providers, is entitled to its moment of languish. But no healthcare organization can afford to languish for long. So how does the board and CEO assure that its collective organization is now moving to a path to get excited about the future. The way forward is to get aggressive about certain business tactics that assure the financial and strategic integrity of your healthcare organization. These tactical steps are as follows: Recalibrate the strategic plan. COVID has changed everything, including finances, demand for medical services, the cultural context within hospitals operate, and the immediate need for healthcare equity and social justice. Given that any hospital’s pre-COVID strategic plan is likely somewhere between partially broken and mostly irrelevant, the first critical step to recovery is to regain control of everything your board and management team needs to know. What does your marketplace now look like? How disrupted is your local demand for services? Is your clinical delivery system still intact? Has your traditional competition changed? Has your organization’s place within the competitive space changed? The questions are endless. But all of the essential questions must be posed and answered within a quantitative analytical framework. And right now, especially, that framework must be technically flawless. Reassess the organization’s financial integrity. The financial questions are going to come fast and furious. Has the basic financial integrity of your organization been damaged? If so, how damaged? How do your pre-COVID and post-COVID operating statements compare? How do your pre-COVID and post-COVID balance sheets compare? Pre-COVID, what was your estimate of capital capacity? What is your revised estimate of capital capacity? If the strategic plan is changing dramatically, are your total financial resources still sufficient to support that post-COVID strategy? Again, there are many more questions than easy answers, and, again, the financial analytics must be impeccable. Rework costs. The third tactical tool necessary to push your organization forward is bringing post-COVID costs in line with post-COVID revenue. I have written on this point previously. Let’s add to the discussion the note that your organization will languish indefinitely if the overall cost structure cannot be brought into line to assure ongoing sufficient profitability and capital capacity. The post-COVID period will demand a new sophistication in establishing a lower overall cost point for your hospital. Four key principles will support this process: recognizing that much of the low hanging costs has already been picked, approaching cost reduction as a continuous process, focusing hard on corporate overhead and shared services costs, and taking a new and fresh look at automation, outsourcing, and offshoring. The last months of the COVID pandemic have been difficult in every way one might characterize difficult. One might say that hospital providers have earned the right for some time to languish. But let’s be candid: the “languish honeymoon” has to end sometime, and from my perspective now would be that time. All hospital boards and associated CEOs need to take a good look at their post-COVID organizations and immediately step forward to assure their organizations’ strategic and financial integrity. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
Every healthcare organization, large or small, depends on an internal gyroscope to assure its organizational stability and maintain its administrative and clinical navigation systems. That healthcare gyroscope is a delicate combination of management, governance, and medical attitudes and processes that keeps all complex healthcare organizations functioning in a way that serves the best interests of its patients and associated communities. The COVID pandemic has impacted every aspect of our society in ways that we immediately understand and in other ways that it may take years and years to comprehend. In this regard, no institution may have been more emotionally and managerially impacted by the pandemic than the American hospital. That healthcare gyroscope in many healthcare providers has likely been knocked on its side and is now uselessly spinning sending the organization off in haphazard directions. In the post-pandemic period healthcare leaders need to locate the most necessary set of strategic and operating plans which will most immediately re-establish that internal healthcare gyroscope. Here are a handful of suggested strategies that may prove most essential.
The healthcare environment has never been static. But change has been incremental and to a great extent predictable. The COVID pandemic has brought new, unpredictable external forces to healthcare that have already begun to affect the nature of healthcare’s competitive dynamic and accelerate the pace of change. To weather this new environment, healthcare organizations need to achieve a new basis of stability. The above four strategies and their associated day-to-day tactics are just the beginning of the post-pandemic re-set for American healthcare providers. But together they can combine to set that organizational gyroscope spinning back toward governance, managerial, and clinical stability. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! By Kenneth Kaufman
America is changing in too many ways to count. The political and cultural ramifications of an increasingly pluralistic population are harder and harder to predict and make overall governance of complex healthcare organizations an increasing challenge. For starters, the definition of healthcare is fast changing, and it now includes not only inpatient and outpatient clinical care but also the broader demands of public health. And that public health definition gets broader and broader every day, and now encompasses the COVID-induced mental health epidemic and the nationwide accelerating gun violence. This widening definition of healthcare is demanding a new board vision of service to its community and a new associated strategic plan that re-sets the next ten years of American healthcare. In the past, the board’s job was relatively straightforward: to monitor and oversee the internal workings of its hospital and health system. That remains a key board role. But in 2021, the business externalities are in ascendancy. No hospital board can set a correct strategic direction without accurately recognizing and reacting to unprecedented external business conditions. These externalities are remarkable and at the least include:
Finally, every board must recognize the power and influence of a fast-changing stakeholder environment. In the recent past, healthcare system stakeholders included the board, management, and doctors—period. But now, the stakeholders that impinge on health system operations and policy include patients, employees, sub-groups of employees, multiple communities, local government, state government, the federal government, political movements, religious influences, other not-for-profit organizations, BIG media, and social media. It all comes together to form an essentially uncontrollable business environment that seems to change by the day and sometimes by the hour. When you add the external business conditions to the long line of activist stakeholders, you get a rather new list of board challenges and responsibilities that include:
It’s hard to be a hospital board in 2021, and it’s not likely to get easier anytime soon. Planning your next event? Get in touch with us at the Capitol City Speakers Bureau today to schedule your ideal speaker and make your event a success! |
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