HealthCare Voice

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.

Technology and Media: Remarkable Visions For The Future

As we cruise through the final days of 2011, the scribes of media and technology are busy laying their visions for the future.

Based on two articles in Monday morning’s New York Times, we should all fasten our seat belts, 2012 is going to be a fast and fascinating ride.  For healthcare organizations, many of which are struggling mightily just to implement and remain current with basic  information systems infrastructure to improve patient safety and operating efficiency, these predictions may evoke a dire question: How can we afford to keep up?  For an industry that trails other business sectors from five to 10 years in terms of information systems, that is a legitimate concern with some interesting consequences.  But that is a question for another day.  

Let’s start today with something as basic as the remote control for the television.  Respected media writer David Carr of the New York Times characterizes the current evolution of the remote as “...a little like hitting your television with a stick until it delivers what you want.  If things go as they should, we will spend less time looking under the couch for the remote and more time telling our television to get us the seventh episode of the second season of ‘Boardwalk Empire’.”  This month “Xbox 360 owners were already able to search TV shows by voice.  “...someday I should be able to walk into a hotel in Kansas, tell the television who I am and find [all the content that] I have [previously] bought and paid for, there for the consuming,” Carr writes.  This is one of the many promises of Cloud computing.  

“The iPad on your lap is a screen that makes it easy to navigate toward a completely personal experience.  That screen on your living room wall is going to have to perform the same way to remain relevant.”

Traditional content providers like the Wall Street Journal are already adding hours upon hours each month of video content to the web site to provide greater context for the stories in the morning business newspaper, still the largest daily circulation in the United States.  Venerable papers like Mr. Carr’s New York Times will either master the integration of video with written content, creating new value for paying subscribers, or they will perish.

Once news content providers with minimal presence in the U.S., like the BBC and Al Jazeera, “are no longer regional curios, they are here,” Mr. Carr explains. (FYI, current and former state department officers say Al Jazeera is a good source of information regarding developments in the Middle East, and the thinking of the Arab Street.  BBC broadcasts on numerous US NPR outlets.  This, too, is a great source of world news that most US TV networks and newspapers no longer cover.)

Most people do not know who Bernie Meyerson is and feel no compulsion to learn more about him.  They should.  He is the Vice President for Innovation at I.B.M. and a highly regarded researcher in advanced microprocessor design and computer systems.  It is Mr. Meyerson who ovrsees I.B.M.’s list of technological innovations that they think will come true in the next five years:

1. Small amounts of energy created by actions like people walking, or water running through a pipe, will be captured and stored in batteries and used to power things like phones, cars, or homes. ”You will see new ecosystems for generation and capture,”  the NY Times quoted Mr. Meyerson in its Monday morning BITS section.  “You [people] generate 60 to 65 watts [of energy] while walking.  You could easily use that to power your phone forever.”
2. Passwords as used today will disappear as increasingly powerful phones and sensors will store your personal biometric information.  This will enable computers and other machines to validate who you say you are.
3. Sensors on and inside the human brain will allow for the mental control of objects.  There are already experiments where the mind moves sensors, but Mr. Meyerson goes further: “You will observe thought patterns, which are highly personal.  You can use this to better understand stroke or disorders like autism,” Mr. Meyerson predicted.
4. Powerful mobile devices capable of precise language translation will belong to 80 percent of the world’s population.  Ubiquitous voice recognition and translation capabilities will make the phones useful to large segments of the population that are illiterate  or who use languages that are not easily written with keypads. (Does anyone think the world can become flatter?)
5. Personalized information filters and search will bring you only the information you want.  “This will invert the premise of marketing. The [smart] phones will start to be your advocate, recognizing what is near and dear to you and getting it.  Instead of companies speaking to you, you will reach out to companies.” (This makes Seth Godin’s Permission Marketing, a novel concept of the Fast Company era of the 90s almost irrelevant.)

A county judge in Fort Worth once said of major change:  “The train is on the tracks.  You are either on the train or on the tracks.”  

That seems to be remarkable guidance for those of us in healthcare as we scramble to adapt to these technological changes.

© 2011 John Gregory Self

Seed Newsvine

Humbled By Connectivity

A couple of years ago I lectured to graduate students at a major university on career strategies and personal brand management. As the students entered the lecture hall, a significant number opened their laptops. I told my son who is a graduate student (SMU) that they thought enough of my lecture that they were taking notes. 

He laughed. Out loud. 

"Dad, they were surfing the web, looking at email, or on Facebook, and those that weren't on their computers were probably texting on their phones." 

Humbled by a lack of understanding of how connectivity has changed our lives and our attention spans.

© 2011 John Gregory Self

Seed Newsvine

Texas Provider Shows Local Innovation, Not Congress, Will Lead Real Reform

Healthcare reform -- I am talking about true, structural reform that actually saves real money (versus CBO estimates) -- is not going to come from Washington.  It will come one hospital, one provider, one community at a time, led by CEOs who are willing to take risks and empower their physicians and employees to rethink how care should be delivered.

The irony in this scenario is that it will be the blunt force of the federal government's biggest and most compelling weapon -- the power of the purse -- that will be needed to unleash the creative forces necessary to craft innovative new models.  Unfortunately, we are an industry that does not like to consider game-changing reform until forced to do so. 

Here is one interesting example of where a creative group of healthcare executives conceived a plan to improve quality and access while saving real-world dollars.  MedStar, the Fort Worth/Tarrant County emergency medical services authority which operates 911 and non-emergency transports without subsidy from its member cities or the county, is in the midst of a program trial designed to reduce the unnecessary transport of patients with chronic illnesses such as diabetes and pulmonary disease.  By making house calls when the advanced paramedics were available in the area where one of the study patients resided, MedStar recorded significant reductions in the number of unnecessary transports that clogged the county trauma center and added big costs to the taxpayers who provided for indigent care through ad-valorem taxes.  MedStar is now preparing to launch a nurse triage program to direct patients who do not need emergency transport, to more appropriate and cost-effective patient care settings.  This, too, should help reduce costs to the taxpayer and free up valuable resources at the public hospital to care for those who need a higher level of treatment. By some estimates this limited trial program has saved hospitals, primarily the public trauma center where many of these patients would have ended up, millions of dollars.

While showing great promise, this approach cannot be easily replicated in America's largest cities, regardless of the savings or benefits to the patients. Why?  Because the vast majority of the big-city EMS services are operated by fire departments, organizations with union bargaining agreements and work rules.

Herein lies an interesting twist to the local reform concept.  Fire department EMS providers are often the most inefficient providers of EMS services, even though the quality of care data does not conclusively justify their high costs. For example, there are typically the same number of fire department operated ambulances on duty at 3 AM on Sunday morning as there are on a payday Friday night. By contrast, MedStar flexes their unit hours and staffing based on computer models that forecast demand by time of day, day of week. Moreover, the paramedics do not sit around at a fire station waiting for a call.  Dispatchers, using the demand forecasts, "post" the ambulances in an area where calls are likely to come. That eliminates overhead costs that are almost always born by the taxpayers and improves response times.  There are fire departments that are experimenting with innovative programs but these, too, are underwritten by taxpayers.  

MedStar's fees for service may be higher than a typical fire department charges for a similar service, but consumers can join a membership program to protect against out-of-pocket expenses.  Moreover, indigent patients are never denied care. Even without taxpayer support, he system is currently financially self-sufficient, but they are not resting on their laurels.  They know that cuts in reimbursement will be painful.  "We will either innovate or become irrelevant," one senior MedStar exectuve said recently.

The healthcare industry is going to change. To remain relevant, providers, and the companies who provide services or products, must innovate and then redeploy technology to rewrite the rules for how we will all operate in the future.

© 2011 John Gregory Self

Seed Newsvine

Leadership Check-Up

The leadership team that you have today may not be the team that can help you move to the next level of performance, a new peak that may mean the difference between success or selling to a competitor.

The road ahead for healthcare providers is fraught with unprecedented challenges.  Today, more than any other time in the last 30 years, CEOs realize that waiting too long to fine tune their leadership resources could lead to serious consequences.

There is an emerging trend  -- CEOs are giving their organizations a “leadership checkup” using their internal organization development team or an outside consultant.

This is a dicey proposition, especially if you have a stable team that, up to now, has consistently produced good results.  You do not want to embark on a assessment strategy that will put valued members of the team "in play" – sampling the job market in an over abundance of caution because the leadership assessment could cost them their job security.   

To succeed – that is to say to produce a realistic assessment that provides insight while valuing the contributions of the team – you must begin by selecting the right consultant, one who offers a balanced set of skills, from diplomacy and compassion to operational insight and a keen understanding of the challenges ahead.  But more importantly, you must have a consultant that, in the privacy of the CEO’s office, will tell them what they need to hear, not what they want to hear, free of financial motives.

Most consultants come to the table with a set of built-in weaknesses – most of which are built around the desire to secure additional add-on consulting or a future engagement.  Not everyone in the market is concerned with doing the right thing, particularly if their performance and financial incentives favor the art of winning add-on business.

Subject matter expertise is also important.  Healthcare is a complex and unique industry.  Legendary management guru Peter Drucker posited that hospitals are among the most complex of human organizations every created.  Leadership experts or coaches that lack a depth of knowledge of healthcare delivery and the impact that budget deficit reductions will have on healthcare providers are not ideally suited for this work. 

The game is changing for executive recruiters as well.  The traditional transactional model of “order placement” will not work.  CEOs need more than an “order taker.”  They need a leadership consultant who understands the issues, and who is as obsessed with the results as their Client.

The solution for CEOs is to look for executive recruiters who understand that their 50-year-old business model has changed and that it is not just about the fee.

In the end, we will all change.

 

© 2011 John Gregory Self

Seed Newsvine

A New Type of CMO

Healthcare reform is extending beyond the Washington beltway.

You can see it in how health systems, hospitals and other providers are shifting their marketing strategies from the traditional wholesale approach -- physicians are the primary customer -- to retail marketing in which hospitals appeal directly to patients on the basis of quality, safety, technology, scope of services and access.  

As physicians shift their employment and business orientation from physician-owned practices to employment by hospitals and insurance companies -- yes, payors are beginning to acquire practices as well -- hospitals are turning their attention directly to the patients.

In the process, CEOs are creating yet another CMO position for their senior leadership team: Chief Marketing Officer. In the earliest days, marketing Vice Presidents or Directors were seen, more often than not, primarily as strategy, advertising and/or "sales" people.  

Providers now are quickly adjusting their perspective, acquiring sophisticated marketing information systems to aggregate and analyze a mountain of data hospitals have been collecting for years but never used in a meaningful way.

HealthLeaders.Com has published an excellent article, Image Makeover that is worthy of review. 

Read More.

© 2011 John Gregory Self

Seed Newsvine

Who Will Provide the Change We Really Need?

I don't know about you, but I am frustrated.  

We are at the start of another political season to "decide the fate of America."  But we all know, deep down, that when we listen to the two political parties nothing is going to change even though change is something we desperately need.  

I am not talking about "change you can believe in" or change that will "restore American values."  Those are just simplistic political talking points that clearly do not translate into real change that will help the American middle class, Main Street businesses, the healthcare industry or anyone else that really needs and wants their lot in life to improve.

This latest economic downturn has exposed deep structural problems in our society, according to David Brooks, a conservative columnist for The New York Times. He argues that the solutions by America's two-party system are not addressing the critical issues of our time:

• Unsustainable levels of debt
• Inability to generate middle class incomes
• Dysfunctional political system
• Steady growth in the dominance of special interests
• Gradual loss of national vitality

"The number of business start-ups per capita has been falling steadily since 1983.  Male wages have been stagnant for about 40 years. The American working class -- those without a college degree -- is being decimated, economically and socially.  In 1960, 83 percent of the working class were married. Now only 48 percent are," Mr. Brooks writes.

"Large majorities think the country is on the wrong track and have for years.  Large pluralities believe their children will have fewer opportunities than they do.

"Voters are in the market for new movements and new combinations, yet the two political parties have grown more rigid."

Mr. Brooks, who is protesting that he and his colleagues will have to cover yet another political season absent any new creative thinking, goes to the heart of the matter with his criticism of the current orthodoxy of Republicans and Democrats. 

The core belief of the Republican party that smaller government is the answer appears to be based on a belief that the American people will not do something really stupid en masse. But we did.  We may want to point our finger at Congress and recent Presidents, but we voters are just as guilty in terms of our deficit spending. As a nation we have lived above our means for years, from buying bigger houses than we could afford and taking on new home equity debt with the silly belief that real estate values would never fall, to purchasing a lifestyle we could just as easily do without.  All of it using borrowed money. All the while our government failed to use the regulations already on the books to make the mortgage loan industry and Wall Street bankers do the right thing.  Their bad behavior may have sparked the crisis, but if not this calamity, something else would have come along.  In looking over the last 10 years, if you take out the devastating real estate bubble, job growth in the U.S. has been essentially flat since 2000.

Today, "the Republican growth agenda offers tax cuts and not much else," Mr. Brooks contends, "...they do nothing to address the structural problems that are causing the working class crisis."  The GOP plan is "fiscally irresponsible and politically impossible. 

"They do not design policies to help their own working class voters," Mr. Brooks says. Rather, they use policy proposals as "signaling devices  -- as ways to assure the base that they are 100 percent orthodox and rigidly loyal.

"As for the Democrats, they offer practically nothing.  They acknowledge huge problems like wage stagnation and then offer...light rail! Solar panels!

"It was telling that the Democrats offered no budget this year even though they are supposedly running the country. That is because they are trapped in a bygone era.  

"Mentally, they are living in an era of affluence, but actually they are living in an era of austerity. They have these great spending ideas but there is no longer any money to pay for them and there won't be for decades. Democrats dream New Deal dreams, propose nothing and try to win elections by making sure nobody touches Medicare," Mr. Brooks writes

Mr. Brooks believes that covering the upcoming election will be akin to "covering competition between two Soviet refrigerator companies, cold-war relics offering products that never change."

I have come to believe that while we may be a nation of incredible thinkers who are capable to creating enormous economic growth, our political class, with only a few exceptions, is content with the new lows of group think that sucks the air right out of the room.  At a critical time when solutions are needed, solving problems is now secondary to re-election, and we all know it.

The American people want answers and action to deliver real solutions. Let's hope they will not settle for sound bites, clever disinformation, and political jingoisms that characterized our last three political campaigns. I sense that we are approaching a tipping point. I am just not sure what is going to happen when the tip occurs and that concerns me. 

As a former reporter, there are some questions I would like to ask the candidates if I were on the campaign trail.   

What about you?  What would you ask the President and the gaggle of Republicans who aspire to lead?  Remember, whatever they propose in the way of a solution, you will get the tab.

© 2011 John Gregory Self

Seed Newsvine

GUEST BLOG: Jobs In The Growing Healthcare Industry

Today marks a first for HealthCare Voice:  a guest blog posting. Taylor Dardan is a dedicated cancer prevention advocate and supporter of private healthcare. He steadfastly believes that America's healthcare system in one of the finest in the world and is one of the most innovative and robust market sectors in America because it consistently draws among the top medical and business talent.  He is a medical student, and lives in the Southeastern United States.  -- Editor

 By Taylor Dardan

The healthcare industry, already one of the largest business sectors in the US, is one of the few career fields that despite the hard economic woes, is continuing to hire.  In fact, healthcare jobs are expected to grow faster than any other job field, with an extraordinary 3.2 million new jobs projected to be created by 2018.  And it’s not only surgeons, specialists, and primary-care physicians whose jobs are in demand, its registered nurses, home health aides, medical assistants, and medical secretaries. 

In fact, with over 580,000 new jobs expected to be created within the next five years, registered nurses are one of the most in-demand careers in the entire US.  Furthermore, this number doesn’t even include the thousands of jobs that are slated to become available as older nurses retire.  A large majority of these new jobs are expected to be in home health care services and outpatient care, where there is expected to be about 35 percent job growth.  Likewise, home health aides should have no problem finding employment as the field is expected to rapidly develop as an expected 384,000 new jobs are expected to be created. Home health aides work as hired caregivers to people who are unable to either leave their homes or live on their own.  As baby boomers continue to age and diseases with a late onset like mesothelioma, Alzheimer’s, and Huntington’s are diagnosed in increasing numbers, the amount of people needing home health aides is expected to rocket. 

Medical assistants, on the other hand, are on the opposite end of the healthcare spectrum.  Medical assistants, a staple of the healthcare industry and who perform administrative and clinical tasks, are in demand across the country already and their ranks are expected to grow by 27 percent.  Although jobs on the administrative side are largely in hospitals, the largest and slowest growing healthcare industry segment, they are still expected to far outpace the average job growth as America expands its health coverage to meet the burgeoning needs of an aging population.  Even jobs that are far more related to administrative duties than health care, such as medical secretaries and medical transcriptionists are expected to experience significant levels of job growth.  

Ultimately, as a large portion of Americans age and experience late onset disorders and diseases, it will force the entire healthcare industry to expand rapidly.  A large portion of the job growth is expected to be related to the diagnosis and treatment of cancer.  Researchers at the National Cancer Institute however, have reported that by 2020 the health care costs associated with cancer treatment could skyrocket up to $158 billion, a stunning 27 percent increase.  In fact, even if there is no increase in the rate of cancer diagnoses, increasing healthcare and technology costs could easily push the costs up to between $173 and $207 billion with just a two percent to five percent increase annually. 

 

Seed Newsvine

Apple Redefines Retail, Delights Customers

Apple has redefined the rules for retailing and continues to set records for performance.  Known as a company that consistently delights its customers with innovative new, cool products, its retail operations are critical to the company’s phenomenal record for innovation.

“They basically took the old book of retail, threw it out and started over,” Piper Jaffray Analyst, Gene Munster, said in USA Today on Thursday. 

Apple defied conventional wisdom that computer makers make poor retailers.  Gateway tried it with their country store concept in the early 2000s. Poor locations, uneven in-store service (I could never get waited on. With checkbook in hand and store associates chatting it up in the back I left and bought somewhere else) and poor merchandising produced a financial disaster, forcing them to close more than 180 stores in 2004.  Gateway is now owned by Acer.

At the core of their stores and customer interaction design is an overarching pillar of the Apple corporate culture: delight your customer with a great experience.

It is definitely working.  Apple now operates 323 stores employing more than 30,000 people worldwide, including 16 high profile stores.  One, their glass cube store in New York, is open 24/7, 365 days a year.  That one store brings in between $400 and $500 million per year, according to USA Today.

Sales last quarter shot up 90 percent to $1.5 billion to $3.2 billion thanks in part to the introduction of the iPad, the company reported.

Their retail success is not due to just their clever, well designed gadgets – computers, iPods, iPads and iPhones – but also to the way the stores are designed both in terms of layout and for customer interaction.

When you enter an Apple store you are met by a greeter. For those of you who have had the experience, you know these are NOT your Wal-Mart greeters.  They are hip, they are cool and they armed with an iPad to capture your name and why you are visiting the store.  When the first sales associate becomes available – the stores are almost always busy – they meet you at the product station.  If you own an Apple product and have a question, you are directed to the Genius Bar where Apple experts can help you solve a problem.  Most technical issues are resolved in the store, including hard drive replacement.  Compare that with a certain technical squad at one of the other big box retailers who also sell Apple: replacing the hard drive means surrendering your computer for up to two weeks.

When you buy a computer, a phone or one of their other products, an associate from the supply room brings it to you – having been electronically alerted by your sales associate with a special iPhone.

There are no “check out” counters.  Using the same iPhone that transmitted your product selection, the sales associate “rings up the sale” using credit and debit cards right on the spot.  Within seconds, you receive a receipt via email.  I do not know what happens when people pay with cash or check, but I suspect that process is innovative as well.

While our economy continues to sputter in a slow recovery mode, and with an ongoing onslaught of dire predictions that the U.S. has lost its innovation and competitive advantage in a global economy, I have a suggestion that will probably help improve your spirits for the future of American business.

Visit an Apple store.

 

© 2011 John Gregory Self

Seed Newsvine

Delighting Your Customers

Improving the customer service experience is one of the new buzz phrases that many healthcare executives are using in connection with improving their HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems) scores. 

For my non-healthcare readers, HCAPHPS scores are important because they will drive higher rates of reimbursement in the near term.  Beyond that, the reality of the federal deficit and long-term debt crisis requiring significant cuts in Medicare spending, HCAPHPS will become a tool to penalize non-performing hospitals with materially lower rates of reimbursement.  For many organizations on the bubble of survival, those reductions could lead to closure.

In other industries, such as the consumer technology segment, tablets, MP3 players and software, an exceptional customer experience is the defining factor between market leadership, acceptable mediocrity, and/or embarrassing failure.

Apple is one company that understands the importance of the customer experience.  Delighting the user and excellent customer experience are hard-wired into the culture.  Some would argue those two phrases are two of the most critical elements in defining what makes Apple a leader in innovation and their ability to deliver products that work – that delight the customer.

By contrast, Microsoft’s reputation is “we get it right – the third time.”  They move product to market and then try to improve on it through endless updates and patches.  The Zune MP3 player and the VISTA operating system are two products that quickly come to mind.

At Apple, the designers are key to the development process.  They are among the most important people in the product development process, and other members of the team know and respect that.  At Microsoft, product development rarely includes designers, according to those who do business with the company.  They are an almost “after-the-fact” part of the process.  Recent “improvements” in Outlook are another example.

Apple’s products work and they typically delight their customers. Yes, Apple makes mistakes in design and production, the early roll out of MobileMe and the antenna for the iPhone 4 are two examples of mistakes that made it to public consumption, but for the most part, their mistakes are made and corrected in the design process. For Apple CEO Steve Jobs, the rule “is do not lie to yourself and call something great when it isn’t.”  Jobs will dump product design or development ideas that are not meeting the Apple standard of great and delay product introduction.

Apple’s design of their retail stores and technical support programs are, again, based on delighting the customer.  Microsoft does not control its distribution and its technical support is legendary – bad. Amazingly, many of the computer manufacturers that run Microsoft products have worked hard to match the dismal Microsoft customer service experience. 

While the specifics of Apple’s business model are not applicable to healthcare, their emphasis on delighting the customer and improving the customer experience certainly can and should be adopted by healthcare leaders.

Personal Disclosure:  My  less-than-a year-old Toshiba laptop with its Microsoft Outlook and Business Contact Manager program is now a very effective paper weight next to my MacBook Pro. 

 

© 2011 John Gregory Self

Seed Newsvine

Healthcare Trends, Contradictions and Microsoft

I was reading an article last night that lamented the incredible -- some would say unbelievable -- problems in America's healthcare "system."  No surprise there."  Earlier in the week, I encountered a maddening customer relationship snafu with a global technology company.  The article and my poor service experience served as a stark reminder that healthcare is not the only industry with bad service deliverables and amazing contradictions, but, unfortunately, it is still the gold standard.

This led me to share some thoughts that I find interesting, frustrating and representative (read: tip of the iceberg) of what is wrong with the healthcare industry and our interactions with patients/customers.

1. An onslaught of slick television commercials promoting the benefits of new drugs under the guise of improving patient awareness/education actually generate patient requests for drugs they do not need. Unnecessary visits to the physician requesting one of those miracle drugs ( with scary potential complications) and higher costs result.

2.  We feel a "little off" – perhaps a cold is coming on -- so we call the doctor, or his/her assistant, and request an antibiotic.  Maybe that will magically thwart what is more than likely a virus. Higher costs and the rapid expansion of the number of  life-threatening drug-resistant infections is an unintended consequence. 

3. The claim that ridiculous malpractice lawsuits are driving up healthcare costs is a common theme in the national conversation regarding healthcare reform. A common solution: impose tough tort reforms that will reduce these claims and lower costs.  The state legislature may act but absolutely nothing will change except for reducing the size of the medical malpractice bar and improving the market for physician recruitment.  In Texas, we have tort limits.  The result:  medical liability insurance rates have declined as have the number of malpractice cases, but healthcare costs in Texas are similar to those states that have done nothing and quality of care is really no better. 

4. Hospitals produce expensive television commercials championing quality of care and service and then wonder why patients quickly become dissatisfied with the uneven, siloed, inefficient -- and sometimes dangerous -- care/service they routinely receive. The contrast between what is promised and what actually occurs could not be more startling except, perhaps, in the airline industry where television ads never mention the cramped legroom or those miserable center seats in the coach cabin.

5. Healthcare leaders agree that something must be done to lower healthcare costs but they frequently decry new technology or structural reforms that will lower costs as being too expensive to undertake unless, of course, someone else (hint: our debt-strapped government) pays the bill. The result: we chase the status quo and wonder why our costs continue to rise.

As a healthcare executive with more than 30 years of experience, it is nice to know that our industry is not alone in terms of our ability to find a dark room in which to stumble around. The technology sector is certainly not immune. 

I had to call a large computer software manufacturer for help with their office suite program for my new but not-a-Windows laptop.  The telephone decision tree was endless including an initial and slightly huffy legal privacy disclaimer that was beyond annoying.  I finally spoke with a customer "service" representative -- not in the U.S. -- who, after five minutes of questions and my repeated answers due to a bad satellite link, assigned me a "case" number and promised to transfer me to a specialist who could take care of my problem.  She promptly transferred my call to a non-working telephone extension.  I had to start all over with the annoying legal disclaimer, the endless automated decision tree and the repeated explanations due to the bad satellite or the local telephone system, in whatever far away land those customer service people were located.  I could have been talking to one of the mega-banks. In Microsoft's defense, when I did finally reach a customer service presentative in their Apple section, he was knowledgable and solved the problem.

My first reaction: did the Microsoft executive who designed this customer service technical support system formerly work in a teaching hospital?

© 2011 John Gregory Self

 

Seed Newsvine

A Few Thoughts on Professional Compensation, Misnomers and Healthcare Reform

The other day I was asked about healthcare compensation -- CEOs, physicians and insurance company executives -- and how we could address the seeming imbalance.

Physicians, who understandably are frustrated with the constant pressure of cuts in their payments, have become angry because they realize the deal is stacked against them. Most of their glaring and finger pointing is in the direction of hospital system CEOs, and, no surprise here, insurance company executives, some of whom earn remarkably large salaries. Senior executives in the health insurance industry where generous base salaries, bonuses, delayed compensation and stock options can drive up annual compensation in excess of $10 million fairly quickly, have become a lightning rod for physician frustration and anger.  The pay for health system and hospital CEOs also has risen but not as much, and besides, hospitals do not deny physician payments.  

The imbalance in executive and professional compensation is not an issue that will go away in the estimable future, especially in the healthcare sector.  As lawmakers wrestle with issues, and one another, over how to cut the deficit and the long-term debt, healthcare executives, physicians and other healthcare professionals will find themselves at the nexus of tough debates and policy decisions regarding funding, compensation, quality and increased accountability.  

Although the cost of healthcare -- specifically Medicare -- is one of the biggest problems in the deficit crisis and any solution to reducing the debt, healthcare providers do not live in a compensation vacuum. Hospital CEOs who see leaders in other industries making far more for managing less complexity in operations, want their fair share.  Indeed, over the past 20 years, executive compensation for health system and hospital senior executives has gradually improved.  Physicians, citing their years of education, sacrifice, the demands of a busy practice and the ever -present pressures of accountability, oppose any cuts. In fact, they want more.  For a professional group that was once at the top of the healthcare compensation food chain, they are frustrated with the fact that they are being left behind. This is only natural.  

Here are three thoughts that hopefully will help us begin the long, and perhaps impossible, journey to regaining balance in executive and professional compensation. 

1.  Executive, professional and sports figure compensation is hopelessly screwed up.  They are so far out of whack that we may never recover.  The phrases common sense and executive compensation should not be used in the same sentence.  Common sense is such a misnomer.  It is pretty uncommon when it comes to comp issues in all of these fields. I point the finger at professional sports as one of the most visible and biggest contributors to what has become a ridiculous imbalance between pay, performance and any hope of reasonable balance.  Those of us who follow baseball need to remind ourselves that there are very few jobs in life where one can fail 7 times out of 10 and still be a star and make a huge salary.  In a society that frequently relies on lawsuits to adjudicate a clinical outcome that did not meet a patient's expectation, however silly or unreasonable, the skyrocketing pay for many professional athletes must drive physicians nuts.  

2. While I am sympathetic to the complaints of physicians regarding compensation, I know this will not be an issue that is never successfully resolved.   As we amble through healthcare reform, whether it is with PPACA or the result of the debt reduction crisis, everyone in the healthcare industry will end up with less, unless they can demonstrate exceptional, measurable, verifiable value, and even then, they will probably still get less, just more than those who fail to meet tougher standards. Accountability, performance and results will be key for physicians and professionals who want to hold the line on what they charge or will accept. Our deficit/debt issues are so big, so potentially cataclysmic, that anyone in healthcare who does not believe that we will take a hit is just not in touch with the math.  I wish there was way to avoid compensation pain, but I doubt there will be.  Part of the problem is that hospitals, doctors and other healthcare professionals sit on the sidelines waiting for the change.  We NEVER lead change.  That is why we can be compared to the country dog that came to town: “if you run you get screwed, if you stand still you get screwed. “  We have become adept adapters, not leaders of structural change.

3.  Mohamed A. El-Erian and his colleagues at PIMCO refer to our current economic mess as the "New Normal."  PIMCO is the largest bond fund in the world and they just announced they are not buying any US Treasuries for a while. The rating agency, Standard and Poors, has now fired another shot across the bow of our government hoping to generate action on deficit and debt reduction.  As I survey this economic jumble, our "New Normal," I am reminded of Winston Churchill's great line about the US:  that we will do the right thing AFTER we have tried everything else.   He may have been referring to our involvement in World War II, but his statement was prescient of the path to resolving problems that America tends to follow.  Well, we have just about tried everything else and the options for cleaning the nation's financial disarray will be painful.  Unfortunately, the coming economic reset for physicians and other healthcare professionals will be frustrating and unfair.

I thought about incorporating the theme of shared sacrifice as one of my three points, but that would only have earned me the tag of "insufferable idealist." 

© 2011 John Gregory Self

Seed Newsvine

An Adult Conversation and Other Comments

Random thoughts while wondering if the healthcare industry will take the lead on true cost-saving structural reform or, as usual, wait for someone else (a reluctant Congress)...

At midnight on Monday we either filed our taxes or filed an extension.  This epic annual event prompted a Financial Times columnist to observe that "the 1040 form is to financial planning what waterboarding is to asking a few questions."

The new political catch phrase in the non-stop rhetoric regarding our horrendous debt crisis is "have an adult conversation."  The new game in Washington, apparently, is to see which political party can out "adult" the other in their various public statements on this subject.

Meanwhile, Donald Trump is emerging as a "Tea Party" favorite for President. Conservative columnist David Brooks of the New York Time reported on Tuesday morning that in one poll "he is in (remote) striking distance in a head-to-head with President Obama."   Given some of Mr. Trump's statements of the past, that is a startling development.  Roger Simon of Politico reports today in the Daily Digest that Mr. Trump "... in 2006, when he was 59, (said) that his daughter, then 24, 'does have a very nice figure. I’ve said if Ivanka weren’t my daughter, perhaps I’d be dating her'.” Nice. Very adult.

Read more: http://www.politico.com/news/stories/0411/53377.html#ixzz1JyZFThks

Comedian Chris Rock was quoted by the Financial Times last week as saying that he would not vote for Mr. Trump.  "He will probably just find a better looking country and leave us."

If Mr. Trump wants to raise questions about the President's citizenship and birthplace, then I think it is only fair that he certify that the blonde "thing" perched atop his head is really hair, not a pet or the property one one of his ex-wives. (Former Speaker Newt Gingrich is, by comparison, looking more mainstream in the GOP family values department.)  

Back to his column, Mr. Brooks points out that in 2009 Mr. Trump published yet another inspirational book, Think Like A Champion, in which he praised President Obama's "amazing" and "phenomenal" accomplishments.  "Barack Obama proved that determination combined with opportunity and intelligence can make things happen  -- and in an exceptional way," Mr. Trump wrote.  Apparently semi-candidate Trump now is comfortable in saying that President Obama is "the worst President in American history," Mr. Brooks writes.

Mitt Romney, who is "exploring" whether he should do what everyone believes he is already doing -- run for the GOP presidential nomination -- continues to excoriate the Patient Protection and Affordable Care Act (PPACA) which is also remarkable since PPACA strongly resembles the plan he championed and signed into law while Governor of Massachusetts. 

Meanwhile, back at the budget debate, President Obama is firing away at the GOP budget plan that passed the House last week, suggesting that it was somehow unAmerican. I am not sure how the President will describe the terms of austerity that most assuredly will be imposed by the bond market in the event Democrats and Republicans cannot come to an agreement to extend the deficit limit. When one of your biggest bankers is China, the term unAmerican does have a certain ring to it...

There is good news.  The U.S. debt is only growing at the rate of $4.09 billion per day. This is down from $4.15 billion day from a couple of months ago, no doubt the result of all the adult conversations and austerity the Republican-controlled House is imposing.

Healthcare executives and physicians -- the adults who actually run health systems, hospitals, multi-secialty clinics and other health service providers -- are wondering how they will cope with significantly less money in year 10 of the GOP budget proposal.  That is when the voucher system will kick in with Americans paying the difference between what Medicare pays and the hospital charges.  It is only natural that they hope this crisis -- and the need to reduce Medicare spending -- will go away.  It won't.

The nice thing about "adult" conversations in the political arena:  when they are not filled with invective that can be absolutely ironic.

© 2011 John Gregory Self

Seed Newsvine

Now We Move to the Main Event: Serious Spending Reductions

 

By DAVID ROGERS | 4/8/11 8:32 PM EDT Updated: 4/9/11 9:49 AM EDT

The bottom line to Friday night’s spending deal is a record $40 (sic) billion cut in domestic and foreign aid appropriations – and a hard lesson in the tough and almost permanent disorder of Washington’s budget politics.

Read more: http://www.politico.com/news/stories/0411/52836.html#ixzz1J2CXmcaG

Impressive -- Republicans and Democrats actually agreed to the largest cut in spending in U.S. history. However, sadly, there is a staggering counterpoint to this moment of accomplishment and political credit taking:

 

We experienced weeks of high drama and threats of a government shutdown over spending cuts that are equivalent to about nine days of budget deficit neutral spending.  Yes, our deficit increases on average about $4.08 billion each day.  That is how big, that is how bad, our deficit crisis has become.

Now, we move on to the real battle -- serious reductions in spending in a way that hopefully will not wreck the fragile economic recovery and severely cripple the healthcare delivery industry. 

Rep. Paul Ryan, Chair of the House Budget Committee, has defined this debate with the submission of his budget proposal.  As I have written in the past, you may not agree with Mr. Ryan's budget plan -- Paul Krugman, Princeton's Nobel Laureate in economics and New York Times columnist certainly does not -- but he at least has had the political courage to acknowledge the problem and to propose a correction.

 

As healthcare leaders, we must now focus on this problem because it is not healthcare reform that will change or wreck our lives as we know them today, but the deficit crisis and the fact that Medicare spending will be the biggest issue in this seminal debate over our country's future.

Consider this:  two 56-year-olds with average earnings will pay $140,000 in dedicated Medicare taxes over their lifetimes.  They will receive $430,000 in benefits,  conservative columnist David Brooks wrote in the Friday New York Times.  It is not important whether you agree with Mr. Ryan's approach, the math simply does not work, and that leaves us with only one course of action: we must reform this entitlement program in a way that we cure this acturial imbalance.

I do not have the answers, but I do believe that healthcare leaders -- physicians, hospital executives and insurers -- can craft a solution that will work far better than anything that comes from Congress, which took weeks of high drama just to agree on cuts that will yield only nine days of deficit neutral spending over the next six months.

This was, as Politco reported, "a hard lesson in the tough and almost permanent disorder of Washington’s budget politics."

© 2011 John Gregory Self

Seed Newsvine

Very Bad Polling Data on Spending Cuts

New polls concerning the voter's diminishing appetite for making the hard choices to curb deficit spending and pay down the debt are not encouraging.  In fact, they are scary. 

Take this report from Politico in Monday morning's news brief:  "Govs face budget blowback"   Alexander Burns reports on the findings of  several polls.

"It was supposed to be one of the clearest messages of the 2010 elections: Voters were finally fed up with government spending.

"It felt like the usual rules had changed, and that Americans were worried enough about the size of  government to support a new era of belt-tightening. They wanted leaders to make the tough choices – and would stick by the ones who did.

"Now, a new wave of polling has challenged that consensus, raising serious questions about whether voters really are yearning for a grown-up conversation about the cost of government — or would simply rather keep punting the problem down the road, just like in the past.

"Almost every governor who’s tried to deliver a take-your-medicine message has paid a price. And widespread polling data suggests a chasm between what Americans say they want and the price they’re prepared to pay to get there."

Read more: http://www.politico.com/news/stories/0311/52002.html#ixzz1HtvS2XSW

These latest polls reaffirm what some political observers have believed for a long time -- that Americans want big government service, they just not want to pay for it.

This is indeed a very bad sign for the healthcare industry.

Congress, badly divided on the depth and scope of spending cuts with both political parties dancing around the possibility of another government shutdown, could very well fold their cards -- yet again -- without producing a meaningful solution to this growing crisis. 

This is not the time for healthcare leaders to sit on the sideline.

The LAST THING healthcare providers should want is for the bond markets to impose fiscal discipline on us.  Given that Medicare is the single biggest driver of the deficit, we probably will face devastating consequences. We will be much better off if we force Congress to address this matter, even if it is the adoption of the  deficit reduction strategy set out in the report from the  bi-partisan National Commission on Fiscal Responsibility and Reform.   This plan would probably placate the bond markets who are becoming increasingly restive with our bi-partisan lack of fiscal discipline.  If Congress fails to raise the deficit limit, given the hard-line approach of many of the Tea Party members, all bets are off. It is possible that could trigger a market response akin to the austerity measures forced on Greece.

Whether a massive health system, a thriving community hospital, physician group practice or a small business like JohnGSelf Associates, we all have a major stake in what happens in Washington over the next several weeks.

 

Seed Newsvine

Businesses Oppose Repeal of Healthcare Reform: Poll

Depending on your source of news and information, you either believe that the Patient Protection and Affordable Care Act (PPACA) is destined for repeal or almost  certainly will be overturned by the Supreme Court, or that this hallmark legislation was a much needed, albeit imperfect, first step in helping improve healthcare delivery in the nation.

Regrettably, the news reporting and opinion “analysis” fail to provide a full picture.  We tend to listen to what we agree with – when we have a choice. At the core, I am really no different, but as a former reporter, I tend to visit the other side.  I rather enjoy pushing myself out of my safe zone.  Safe can produce amazing mediocrity and more often than not I am pleasantly surprised with what I find -- at times, new facts or a different perspective that helps shape my point of view.

There is one survey that you may find surprising if you are pro-business conservative:  Only three percent of business leaders surveyed by the HR Policy Association favored repeal of the PPACA.  The HR Policy Association consists of over 300 of the largest corporations doing business in the United States and globally. Collectively, their members employ more than 20 million employees worldwide and have a market capitalization of more than $7.5 trillion.

Writing in Human Resource Executive, Jared Shelly, benefits columnist for that publication, reported that businesses did offer several suggestions on how to make the bill better:

• Remove the 1099 reporting requirement for vendors paid more than $600 or more.  They argue that large businesses could be forced to issue millions of 1099s each year. 
• Create limiting stipulations for PPACA’s provisions for coverage of children on their parent’s benefit plan up to the age of 26, excluding those who get coverage from their own employer or those who are married.  Businesses feel this provision will increase their health benefit costs.
• Move away from the hospital/physician fee-for-service model, a system that fuels dysfunction.  “There is a lot of care that isn’t needed and can be downright harmful,” said Helen Darling, President of the Washington-based National Business Group on Health. “We are paying for services whether they are needed or not, whether they are effective or not.  It’s a mess," she told Mr. Shelly.

It is a fool’s errand to make firm predictions regarding what Congress and the Supreme Court will or will not do.  Unless there is a major shift in political power or the Supreme Court rules that the use of the commercial clause of the Constitution to support mandates for insurance purchase is unconstitutional, PPACA, while not perfect, is apparently better in the eyes of business than doing nothing.

© 2011 John Gregory Self

Seed Newsvine

Healthcare Reform, the National Debt and Career Management

Last Wednesday I spoke to the Health Management and Policy grad students at the University of Michigan. We discussed how healthcare reform will change this industry. But the bigger threat is the budget crisis and the looming national debt/bond market upheaval, which could have abrupt, dramatic and painful consequences for our industry. Look at the disruptions and severe austerity measures in the euro zone. We are not far behind -- three to five years, according to David Walker, deficit hawk and former Controller General of the GAO. These are different times that require new career strategies.

I challenge new graduates -- and early careerists -- to think of themselves as a brand and to manage that career brand with enormous caution and focus.

Our sovereign debt problem poses real challenges for career management, especially for new graduates and early careerists.  First among them is increasing pressure to perform, to deliver measurable value and do it with less, not more, resources. Reimbursement will only decline. The amount of money healthcare providers are paid today will probably be the most we will see for a DRG in our lifetime, save some minor adjustments for COL. Managed care companies will only follow CMS in lowering their payments.

These developments will also impact the elusive life balance battle that so many of us wage. There will be the inevitable system consolidation, hospital closures and job loss -- in other words fewer entry level positions with more new graduates competing for the fellowships, internships or even entry level analyst positions. The first job is always the toughest to land, but even if it is not exactly "on point" with your ultimate career path, do it well to prepare yourself for the next step. You will not get any free passes in our “new normal” economy.

Along the way find a mentor --someone who will take the time to tell you things you do not necessarily want to hear when you ask for advice, but listen carefully. Someone who can spot your unrealized or undeveloped talents and then push you to improve will be a necessity for early careerists going forward.

Choose your jobs wisely. There are a host of bad leaders in this and all other industries, and they have the ability to wreck an up and coming career. A good leader is a work of art who will prepare you for the next level. A bad leader is a tragedy.

Start a career journal. Athletes and musicians improve their skills with continuous practice, but what type of practice can leaders use to improve their skills? Journaling. At the end of each week, spend some quiet time reviewing your performance and your decisions. Using regulated thought, replay in your mind the game film of your week’s decisions and interactions with colleagues, as leadership consultant Rand Stagen likes to say. Force yourself to think about what you could have done better -- from analysis, the actual decision, to communicating the way forward. Record your feelings and observations. Ask yourself hard questions. This is not easy work. The journal is not for self-laudatory B.S. It is a record that you can revisit over and over, reminding yourself of important lessons learned.
Wrap all of this together and you begin to understand the importance of effective career brand management.

For early careerists who push themselves to get better, who deliver results and who effectively manage their brand, the healthcare delivery segment will provide incredible career opportunities. But just as the size and performance of athletes has improved substantially over the generations, so will the performance expectations for healthcare leaders.

These are troubling times, but there are abundant opportunities for those who want to make a difference.

© 2011 John Gregory Self

ahref="http://technorati.com/faves?sub=addfavbtn&add=http://healthcarevoice.typepad.com/healthcare_voice"> Seed Newsvine

Forget Sinatra, the Beatles, Even Acid Rock...The Next Generation's Fads Are More About Technology, Less About Music

I have achieved a milestone in my life -- I am now officially a man of a certain age. 

I knew I had ascended to such a lofty (read: older) position when I found myself about to instruct a son on one of life's profound truths.  Before I committed that sin, I caught myself with the thought, 'Oh hell, I sound just like my father!'

There has always been a generational tension between mature, responsible elders and their not-yet-responsible youth. These tensions give way to a universal question: Do these kids really get it?  Until recently, most of this tension came from the inevitable cultural shifts, in entertainment primarily. In my pre-teen years, the young "bobby sox" women in poodle skirts and men with their slicked back hair swooned and cheered themselves into a state of near hysteria for a young Frank Sinatra.  This brash young cultural phenomenon from Hoboken, NJ caused just as much consternation for their bewildered elders as did the Beatles who produced shock waves for the parents of Baby Boomers when these long-haired musicians with amplified "music" and less than complex lyrics burst on to the American music scene. Later, with the arrival of acid rock, free-love and drugs, terrified parents... Well, you get the picture.  Some were so rattled with that latest cultural/musical evolution that they took to wearing Nehru jackets to their country clubs.  The end of modern civilization was obviously near.

Now we are witnessing yet another cultural shift. This time it is less about music and more about technology. Today's middle-aged executives, many of whom are not particularly technologically savvy, routinely say that if they had to give up one thing to be more productive at work, it would be how much time they spend on email.  Reasonable point.  However, the distraction of email is only a precursor to a more dramatic shift with the newest generation. Generation Y -- also known as the Millennials -- is driven (obsessed) by computer games, interacting with social websites and texting on smart phones. All day -- before school, between classes, and in class, after school, and late into the night.

Case in point: 14-year-old Allison Miller sends and receives 27,000 texts in a month, according to a New York Times article, "Growing Up Digital, Wired for Distraction." She carries on as many as seven text conversations at a time.  That is about 60 text messages for every hour she is awake.  She sometimes gets so caught up in her texting that she forgets to do her homework. Allison is not even close to being an exception. That is the scary part. “Their brains are rewarded not for staying on task but for jumping to the next thing,” said Michael Rich, an associate professor at Harvard Medical School and executive director of the Center on Media and Child Health in Boston.

There are long-term consequences to this latest cultural wave. When Allison and her social network and the millions of other teenagers who are texting/YouTubing/gaming their way through adolescence graduate into the workplace, they will pose unique problems for their employers. And this challenge now has been assigned a name:

Continuous Partial Attention.

Great.  We are producing a generation of nurses, brain surgeons and CEOs who are less able to sustain focus.  I guess this is a modern-day example of the law of unintended consequences. 

© 2011 John Gregory Self

Seed Newsvine

He Saw Trouble Coming. Now He Sees It Going.

In a period of prolonged BAD news, it is a very good news to read that our painful economic nightmare may be drawing to a close. The New York Times business columnist Gretchen Morgenson provided an important insight from top economist Ian Shepherdson who says the beginning of improving economic conditions are evolving.

In 2005, Mr. Shepherdson was one of the first to see a real estate bubble and predicted a meltdown followed by a big recession. He was right. Not many paid attention, but those who did and shorted those complex real estate investment instruments, made billions. 

With all the confusion following the elections -- with GOP House leaders threatening to limit healthcare reform by refusing to fund government implementation, including the expansion of coverage for low income earners and mandates for coverage -- this economic prediction is especially hopeful news for healthcare organizations who have seen a rise in unfunded care as families have lost benefit coverage as the result of business closings and layoffs. 

Big companies, who have had access to credit for some time, are already beginning to hire, but overseas. It is Main Street where the jobs are created, but debt-laden consumers have not been spending. This coupled with extremely tight restrictions on lending for small businesses, has kept the lid on expansion up until now. 

As the recession deepened through 2009 and early 2010, a great many healthcare organizations laid off workers or simply did not replace employees who retired or took jobs elsewhere. As we  move into 2011, now is a good time for CEOs to reassess their market strategies and employment plans. Moving aggressively, getting out in front of competitors by fortifying their leadership and management teams with top employees from other organizations, is the smart move now.

We still have a long way to go and we may not return to the go-go economy of  the mid-1990s for a long time, but this story highlights some encouraging news.

BUSINESS DAY

By GRETCHEN MORGENSON

Published: November 6, 2010

Ian Shepherdson of High Frequency Economics warned in 2005 that real estate would crash and a
recession would ensue. Today he sees reasons for hope.

http://www.nytimes.com/2010/11/07/business/07gret.html

 

Physicians Forced to Tighten Belts or Sell Out

Surveys show that physicians are considering employment options at a record pace.   There is a clear sign that hospitals, eying healthcare reform and the absolute certainty of wave upon wave of reductions in Medicare spending, are moving aggressively to close deals with key physician groups.

Even before reform regulations can be created, there is an incredible sense of urgency building. 

Now physicians, frustrated with Congress's failure to adjust their Medicare reimbursement rates, and realizing that the worst is yet to come, are taking other actions to survive.   

The Medical Group Management Association (MGMA) reported Tuesday that more than 62% of medical practices will likely limit the number of new Medicare patients they accept if scheduled reimbursement cuts go into effect.  Nearly half of practices said they will stop seeing new Medicare patients altogether.

At a time when the whole point of the healthcare "reform"  movement seemed to be focused on improving access for patients, it is more than a little ironic that we are now constructing new barriers for access with the financial savings that were shaved from hospital and physician reumbursement to help pay for the costs of improving access.  This is an excellent example of the  legislative law of uninted consequences.  For most physicians in private practice, it is just maddening.

In a report from the MGMA conference in New Orleans, Modern Physician reporter Maureen McKinney wrote, "More than three-quarters of respondents said they will likely delay the purchase of new equipment or facilities, while about half said they planned to reduce clinical staff. And roughly 45% said they will probably put off purchasing electronic health-record systems."

With these kinds of pressures, it is not surprising that physicians are willing to sell a business they built, many from scratch when medicine was a cottage industry, to avoid managing a new business model that will alter their lives and their finances. For many, selling out is the only life raft they can see. 

For organizations acquiring physician practices, predominantly health systems and hospitals,  the real question is how well they can manage physician financial expectations and productivity issues.  Those were two of the deadly torpedoes that doomed the hospital industry's first attempt to integrate physician practices.   

Add to this mash of issues, surveys show that newly minted resident physicians strongly prefer employment to the far riskier approach of hanging out their own shingle. Even PCPs, who historically were more inclined to follow that path, favor the employment option.

For human resource departments, practice acquisition will create a whole new class of employees and a different set of compensation, benefit and retention issues that could well tax their experience and resources. This will be especially true in secondary market hospitals where HR may be a part-time function.  

© 2010 John Gregory Self

 

Seed Newsvine

Politics, News And A Hopeful Sign From Alaska

A Dispatch from Anchorage:    

Termination Dusting finally arrived, albeit three or four weeks late, many locals believe.

On the political front, an incumbent Republican Senator who was defeated in the party primary has decided to run as a write-in candidate and could make a strong showing.  This could benefit the Democratic nominee but it all depends on the turnout. The GOP nominee has been fairly direct that he will work to dramatically cut federal spending. This could be interesting since Alaska receives about $6 dollars in federal spending for every dollar Alaskans pay in taxes. 

Meanwhile, the state announced that all legal residents -- every man, woman and child -- will receive a check for $1,281, this year's dividend from the permanent oil fund. Yes, it is an annual event.

There was a record melt of ice on the North Slope and inside the Arctic Circle.  Now the bad news, Alaska is still significantly bigger than Texas. 

The trivial aside, I found a much bigger story with the potential to influence healthcare reform.  It deals with a committed group of Native Alaskans who were convinced that they could do a better job of delivering healthcare to the far-flung tribes and small villages across this vast state than the federal government. They made their case and since the late 1990s, that is exactly what has been happening.

The Indian Health Service (IHS), which formerly had more than 300 employees in a regional office in Alaska to administer healthcare for the Native Alaskans, now numbers around 30. IHS funding, required under the various treaties, is sent directly to the tribes through regional not-for-profit healthcare organizations and to the Alaskan Native Healthcare Consortium (ANTHC), which is responsible for operating the modern 150-bed regional referralcenter in Anchoragee.  ANTHC also operates a construction company that builds wastewater treatment plants and installs water systems to some of the most remote
villages in America, an effort that has contributed mightily to the overall improved health care.  Finally, another division focuses on preventative medicine, providing mental health counseling and basic dental and primary care in areas where no physician exists.  Their work has made significant inroads in working with intractable problems as alcoholism.  In the process, the Foundation has amassed a wealth of data that well help ANTHC and its partner at the referral hospital, Southcentral Foundation, create a model that may be applicable to the lower 48 states.  

This is exciting stuff.  When I first came to Anchorage to advise ANTHC on the recruitment of the Administrator for spectacular Alaska Native Medical Center -- I did not know what to  
expect. What I found is a healthcare system so vast, an organization so complex, so unique, and a model of healthcare delivery that may be a blueprint for broader application in improving access and controlling costs in the lower 48.

Now, before I close, let me explain termination dusting.  Earlier in the state's history, the first dusting of snow on the Chugach Mountains which serve as a spectacular backdrop for Anchorage, served as a sign that winter was fast approaching.  They would close their operations and pay off their workers for the year.  Hence the term, termination dusting.

© 2010 John Gregory Self

To Lead Or Adapt...That Is The Question

Healthcare leaders have two choices as the industry begins its uncertain journey into an era of "reform" and reductions in Medicare and Medicaid funding.  They can embrace the changes and get out in front, or they can stand pat, waiting to see what actually happens and then adapt.

The latter modus operandi has gotten us to where we are today.  Healthcare leaders are, without question, the most adept adapters in all of business.  That is an exceptional talent. They figured out Medicare in the 1960s when many proclaimed it would wreck healthcare in America, they quickly mastered TEFRA and the flawed implementation of DRGs (physicians were excluded) in the 1980s, and they survived the Clinton-era Balanced Budget Act as well as a series of other revisions in the late 1990s. All the while most healthcare providers flourished.   However, this time around, I am just not sure that waiting and then adapting is the right option.

As an executive recruiter, I like CEOs who believe that survival means recognizing and "accepting" that healthcare providers will face a series of significant reductions in federal payments over the next 20 to 30 years.  They have accepted the fact that an increase in Medicare and Social Security spending will produce a deficit of nearly $2 trillion unless something is done.  These CEOs,  and their teams, and some physicians, are already at the table designing strategies for new, more cost effective ways to deliver healthcare while improving quality and safety. These leaders understand they are the nexus of real structural reform, not the federal government.

This is the reality of healthcare reform.  Congress is badly divided. Even if one party gains a big majority, some of the devilishly tough issues that must be confronted are best not decided in a forum that is subject to the extreme, sometimes irrational positions of a political base.

A very bright and insightful CFO of a major New Jersey medical center once told me, "We will have to find ways to reduce our costs on an ongoing basis that are at least seven to nine percent below what Medicare pays us or we will not survive.  I know it can be done.  I am not sure how at this point, but this challenge excites me like no other time in my career." 

Making this paradigm shift is not a solo act.  I wonder what his CEO is thinking.  If he is a get-out-in-front leader who also is excited by this challenge, his hospital may be one of the survivors.

© John Gregory Self

 

Seed Newsvine

Hospital CEOs: Building a Community Legacy In Challenging Times

On Thursday I spoke to the Texas Organization of Rural and Community Hospitals (TORCH) near Austin.  I spoke about the importance of empowering employees, a strategic imperative for navigating the very challenging times that lie ahead for hospitals and other healthcare providers.  Sorry for the delay in  filing this post, but this was an enlightening experience.  I left the conference center convinced that my projections -- and those of many others who are far more wiser than me -- that the perils that lie ahead for healthcare organizations (no fault of the recent health [payment] reform measure) are spot on.  As I drove back to Dallas, I kept thinking about the challenges that CEOs will face.

       _______________________

Hospital Chief Executive Officers have a tough job.  Over the next seven to 10 years, it will become a great deal more difficult.  Here is why....

There is no way the healthcare industry can avoid significant reductions in Medicare reimbursement.  With 78 million people flooding the program over the next 20 years we are looking at deficits of nearly $2 trillion in Medicare and Social Security alone.  Even if Congress reins in spending on discretionary programs -- and that is a gigantic "IF" -- the federal government still will not be able to afford the social safety net promises that it has made to senior citizens.  We are already borrowing money to pay some part of Medicare payments now.

Reductions in reimbursement will mean that hospitals -- not Congress -- will be forced to develop plans to restructure how care is delivered more cost effectively with a higher rate of quality and safety.

Making those painfully tough decisions is not a solo act.  Hospital CEOs will need the support of their boards, leadership teams, employees and physicians.  They must all work together in a common purpose -- with a shared vision and a combined willingness to make sacrifices.  In other words, the CEO must empower his executive team colleagues, board members, employees, physicians and community stakeholders to work together to make these really hard, wrenching decisions.  

The good news is that they have seven to 10 years before the real deep financial crunch hits.

Empowering employees and stakeholders is the most effective way to leverage an organization's most important asset to deal with these challenges, but it is not an overnight process.  There will be the inevitable push back, the blind resistance to change based on a passionate hope-against-hope belief that somehow this country's financial problems are not as serious as is being reported and that it will somehow all work out.  It won't.

As CEOs face these incredible challenges, they must also keep their eyes on strategies for maintaining their hospitals as respected, trusted community assets. 

Remember all this the next time you read a news story with an attitude – indignant about hospital CEO pay.  Are there excesses?  Yes.  But by and large these leaders are grossly underpaid, and no where more than in rural and smaller community hospitals.

© John Gregory Self

Seed Newsvine

Employees Shrug: 'Here We Go Again...'

Employees are smart, they are observant, and they possess a keen sensitivity to what their leaders say and do.  They can spot inconsistency a mile away.

Inconsistency -- in communications and in actions -- is the great enemy of leadership credibility.  In healthcare, the three areas where leaders suffer the most credibility damage are: 

1. Quality of care and patient safety
2. Employee relations
3. Customer service

In an effort to improve quality of care and patient safety -- huge problems that have yet to resonate with most politicians and opponents of healthcare reform -- the industry has spent billions of dollars on analysis, training, program design and ongoing assessment.  Hospitals have spent more than several million dollars printing signs and buttons with catchy slogans extolling the importance of quality care.  While some progress has been made, the improvements do not match the financial investment.  Every year thousands of patients die from preventable mistakes, or their hospital care is prolonged, due to serious hospital acquired infections.  

Why? 

Some leadership coaches that have looked at this issue argue that main problem is that the "campaign" to improve quality of care and patient safety has not been inculcated into an organization's cultural DNA. People are assigned to lead quality improvement but there is no C-suite passion. That is a common leadership failing.

Signs and buttons that proclaim "Quality Is The Most Important Thing" are translated by skeptical employees as "Quality Is The Most Important Slogan," according to Dr. Aubrey Daniels in his book "Bringing Out the Best in People."  In other words, if leaders do not consistently eat, sleep, and preach the importance of quality every day, in every possible communication, the industry will see marginal improvements but not to the extent that patients will be truly safe. The employees will see the inconsistency.  

The issues are similar for employee relations and customer service.  Opportunities are lost, money wasted, and bad will produced, because the performance of leaders does not match the performance they expect from their employees.  In far too many hospitals, leaders create campaigns with slogans.  New management initiatives are launched with great fanfare, but then employees pick up inconsistencies.  A Vice President trying to improve productivity or lower costs, can undercut the efforts by word or deed.  Harried nurses, with sicker patients, take short-cuts.  Pesky new priorities emerge as financial or market strategies change. Slowly but surely the focus is lost. The organization moves on. Years later boxes of buttons and signs are found in a remote storage room, and no one can remember the point. 

Employees have great radars.  They see the wheels coming off before anyone else. In far too many organizations, where the leaders develop tunnel vision for the latest crisis, the employees have perfected the shrug of resignation -- here we go again.  

© 2010 John Gregory Self 

Seed Newsvine

Outperforming the Competitors

Healthcare organizations which acquire and retain the best talent will outperform their competitors -- clinically, on patient safety, and financially.  That is why CEOs must devote more time to recruiting, as well as executive, management, and supervisory development, and retention.

CEOs who until now have found success -- and their comfort zone -- chest-high in operational challenges will discover that, gradually over time, their organization's performance will suffer if they remain in that leadership mode.

With a decade or more of reduced reimbursement, and the potential for market disruption unparalleled in the history of our industry, more and more CEOs are recognizing that their human capital -- the people -- is their most important, and frequently under performing, asset.

Empowerment -- bringing out the best in each employee -- will be a strategic imperative for ever healthcare organization.

Here are some starter questions for leaders who realize that they must shift their focus and emphasis in order to achieve sustainable results that will be necessary for financial stability:

1. How would you describe your organization's culture?  (Test your analysis: Do at least 75 percent of the employees agree with your description?)

2. How do potential employees view your organization?  Is your reputation (recruiting brand) sufficient to attract top performers?

3. What is your rate of miss-hires -- the number of executives, directors and managers who leave the organization in twenty-four months or less?  Do you monetize the cost for this transition?

4.  What is your turnover rate?  Do you hold your team accountable for establishing and meeting targets?  Do you calculate costs for this disruption? (Even with the most conservative of formulas, those costs will surprise you.)

5. How can you sustain investment in executive, management, and supervisory development in a decade of shrinking budgets?

6. Are you getting 100 percent from your executives, managers and supervisors? From your employees?  Can you afford to be satisfied with performance at the 60, 70 or 80 percent levels?

Of course there are other questions.  Dozens, from the structure, quality and objectives of your organization's performance evaluation system, to the effectiveness of your orientation program (you should be moving to an onboarding model), to the candidate screening process and cost of identifying and hiring the best people.

Actually putting people first (as your most important asset) -- not just promoting it in recruiting materials or annual reports -- will require a transformational shift for many CEOs. Transformations rarely occur without frustration and conflict, but the journey and the results will be well worth the investment...and heartburn.

© John Gregory Self

Seed Newsvine