HealthCare Voice

A Memory or A Legacy: What Kind of Leader Are You?

There are essentially two types of healthcare leaders.  Those who leave behind memories and those who build a legacy. 

Memories – good and bad – fade from consciousness.  Legacies are forever.  They are not formed by good executives.  They are built by dynamic leaders who are not afraid to take risks with big, transformational ideas.

Great leaders are like works of art.  They build a solid, patient/customer focused culture that is the organization’s heart and soul.  They develop centers of clinical and wellness excellence that are an integral part of the communities they serve.

Bad leaders – who are tragedies – leave behind second-class, dangerous hospitals, or abandoned buildings or, worse yet, a vacant lot where a hospital once stood. (Think Pittsburgh.)

A savvy Chief Executive, who engineered a stunningly successful turnaround of a New York hospital, once said that hospital boards and their CEOs lose money because they choose to.  Yes, they have a myriad of reasons/explanations why they lose, but more often than not those explanations amount to little more than lame excuses, he reasoned.  In the end, it was a matter of choice and the legacy they will leave behind – an inability to make the hard choices or to successfully execute -- that will be a tragedy for their communities

This nation’s hospital CEOs have one of the hardest jobs in all of business.  They run complex businesses that are highly regulated under the silly guise of being a free-market business model.  They have long struggled to balance reimbursement with the rising costs of doing business.  Now it is going to get tougher as Congress, whether its members want to or not, moves to reduce federal spending, which means that the reimbursement we receive from Medicare today is the most we will ever see in our lifetime.  But all is not lost.

As I travel around the country, I periodically lecture to healthcare management graduate students.  This new generation of future healthcare leaders is one of the best.  They "get" the grave challenges and the extent of the nation’s financial crisis, but they are eager to build a lasting legacy – with a radically transformed healthcare business model. 

They are works of art waiting in the wings.

EDITOR's NOTE:  In two weks, HealthCare Voice will move from this location to www.JohnGSelf.Com.  For two weeks, the blog will run on both sites and then we will close this URL and the blog will be on the web page.

© 2011 John Gregory Self

Deficit Reduction: A Threat to Publicly Owned Hospital Management Companies?

Healthcare reform and intense pressures related to this nation’s mounting deficit crisis are two forces that could dramatically alter the financial landscape for investor-owned hospital management companies.

There is a plausible scenario that suggests that over the next five to seven years all will not be well for the nation’s largest publicly owned hospital management companies. Their tribulations will occur not because they are bloated, inefficient operations. No, most are extremely efficient, a tribute to management’s laser focus on reducing costs and daily, if not hourly, scrutiny of performance metrics, mainly staffing. Because they are publicly owned, the real threat will come from their inability to meet Wall Street expectations for year over year growth in earnings.

As Medicare reimbursements are reduced -- most certainly to be followed by cuts in payments by the nation’s managed care providers -- hospitals all across America will get less money for the services they provide. Highly efficient investor-owned hospitals, which have for years bragged that they were lean machines, unlike, they say, the stodgy, poorly managed not-for-profits community medical centers will have less opportunity to reduce costs to maintain margins. This is not to say that investor-owned hospitals will suddenly begin losing money. They won’t. But -- and this is a big but -- they will not be able to sustain their historical performance in terms of growth in earnings, something Wall Street demands. There is only so much fat you can cut before you start hacking away at the bone, the core of your business.

There is an old story of two men flying in a remote region of the Andes Mountains when a vicious storm forced them to make a crash landing. One man was overweight -- some would stay fat. The other was a long-distance runner, the picture of good health. The overweight man survived while the fit man died -- because he had no excess body fat to burn when they ran out of food.

Investor-owned hospitals which depend on their growth in earnings to sustain investor confidence, which then paves the way for access to capital with the most favorable of rates, will face more skeptical lenders and less flexibility to acquire more hospitals in healthcare reform’s period of consolidation. Instead, look for some investor-owned companies to spin off their marginal performers to not-for-profit regional health systems or new, marginally capitalized start-ups. In the end, the losers will be the physicians and the communities who thought they had ensured the future of their hospital when they sold out years earlier.

Isn’t reality ironic?

What do you think?  Is this a plausible scenario or a misread of how deficit reduction cuts to Medicare will impact hospital management?

© 2011 John Gregory Self

 

EDITOR's NOTE:  In two weks, HealthCare Voice will move from this location to www.JohnGSelf.Com.  For two weeks, the blog will run on both sites and then we will close this URL and it will be on the web page.