By Joe Flower
Chief financial officer: tough gig. Seriously.
Whether for a payer or a healthcare provider, the CFO’s job is the exact point where the smiling faces on the billboards meet the double entry, the financing, the payer mix, the debt structure.
And it all has to work out in the black. It has to do that sustainably, not only this year but next year and five years from now. Best guess? It’s going to get a lot tougher, with shifting revenue streams, market boundaries, new technologies, growing consumer expectations and uncertain politics.
Raise your hand if you can tell me the significance of these names: Univac, Control Data, Burroughs, Digital, Honeywell, IBM, NCR.
These companies dominated the computer world in 1980. As of 1990, all but IBM were gone, bankrupt, subsumed into some other company, or just out of the computer business. The one that survived, IBM, is the one that said, “Maybe we should at least get a toehold in this new personal computer game, even though it is risky for our main revenue streams.” All the others went “poof.”
A number of factors—radical new technologies with vast potential, ramifying customer frustration, shifting user base—are coming together to put healthcare today at exactly the place the computing world was in 1980.
A Beautiful System In Danger
The U.S. healthcare system is in many ways a beautiful system. We can be proud of our world-leading technology, gorgeous physical plants, and a vigorous sector fairly fountaining the best jobs.
In many ways, the system is doing really well at what it is designed to do. But we have to ask: What is it designed to do?
The medical care system and the clinicians who work in it are focused on curing people, keeping people healthy, fixing them where they are broken.
The healthcare system that now envelops, manages, and pays for all that wonderful work is designed for a different aim. No one person or group designed it this way. It is a complex adaptive system with many interacting parts that developed over the last half century or so. It is, in a sense, self-designed.
An economic market that works brings together healthcare consumers with providers who can give them what they need at a price they can afford.
The fee-for-service system is working at cross-purposes to the needs of consumers, employers and other buyers. Healthcare costs far too much, is far too wasteful, and still can’t seem to take care of everyone.
No system can long survive working so vividly at cross-purposes to the needs of its real customers and buyers.
Eventually that mismatch generates unrecoverable instability in the system.
The U.S. system has almost exclusively a single financial input: code-driven, incident-focused, insurance-supported, fee-for-service payments. Its other key inputs are not financial but human: the needs of patients, and the commitment and passion of the clinicians and caregivers.
The problem expressed in the iron tongue of financials is: How do we close the gap between our customers’ and clinicians’ real needs and the financial engineering of our systems? How do we shift from the current single-input model to new models that will bring us closer to our customers and help us do the job we are here to do? What are the new dynamics? Who are our new partners and allies? No one does this alone.
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