HealthCare Voice

Medicare and the U.S. Financial Crisis: A Collision Course Is Set

Editor's Note: HealthCare Voice, John Self's  healthcare blog, will be moving to JohnGSelf.Com. in two weeks.  The blog will run on both sites for a couple of weeks and then the content will be exclusively on WWW.JohnGSelf.Com.

John G Self, his blog on stories of hope, redemption, and humor will continue to be featured on Typepad.  Later today he will publish "One Life to Live", thoughts on career management.  His blog, "Gingrich, Grizzard and Marriage" hit many reader's laugh button. 

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A former politically savvy county judge in Fort Worth reportedly once told a group of ambulance providers who were loudly opposing a new regional emergency medical authority designed to enhance service and improve quality:  The train is on the tracks.  You are either on the train, or on the tracks.

I have used that story before.  I am dragging it out again because it accurately reflects where we are in healthcare: The Medicare program as we know it today is on a collision course with the U.S. financial crisis.

In healthcare, the train represents said financial crisis and the profound impact that it will have on government spending for healthcare services at a time when there is an avalanche of new beneficiaries entering the program - one every 8 seconds, according to USA Today.  Over the next 18 years, Medicare's ranks -- those who qualify for government healthcare -- will increase by more than 40 million people, even when factoring in deaths, analysts estimate.                                                                                                                    

 Currently, we are borrowing about 30 cents on every dollar paid to physicians, hospitals and other healthcare providers for Medicare services.

Now, add these numbers to the mix:  The current annual deficit is about $1.27 trillion as of midnight last night (02/09/2012).  The national debt is more than $15.3 trillion. 

What is the difference between the deficit and the debt? 

The deficit is the annual shortfall of revenue to spending.  The national debt is the sum of all outstanding debt owed by the Federal Government.  Nearly two-thirds is the public debt, which is owed to the people, businesses and foreign governments who bought Treasury bills, notes, and bonds.  The rest is owed by the government to itself, and is held as Government Account securities. Most of this is owed to Social Security and other trust funds, which were running surpluses. These securities are a promise to repay these funds to Baby Boomers as they retire over the next 20 years. For now, they are unfunded liabilities. These unfunded liabilities represent a  substantial sum that the federal government has NOT included in its debt calculation. Everyone in Washington knows about this, including all the Presidential candidates, and yet no one is talks about it.

In business, corporations are required to count these unfunded liabilities when they are taken on — and report a big loss to shareholders.  Unlike businesses, however, Congress postpones recording spending commitments until it writes a check.  Those are the promises made for future payments in Social Security, veterans’ benefits, government retirement, healthcare for senior citizens, etc. 

If the deficit and debt numbers scare you, then the amount of unfunded liabilities -- the government's "off balance sheet" debt --  will drive you off a cliff.  That number is about $61 trillion, USA Today reported.  These "unfunded obligations amounts to $528,000 per household. That's more than five times what Americans have borrowed for everything else — mortgages, car loans and other debt. It reflects the challenge as the number of retirees soars over the next 20 years and seniors try to collect on those spending promises." 

The deficit, the debt, the unfunded liabilities – those are numbers so big that it is hard to get our arms around the extent of the problem.  So, lets cut it back to a basic number we can deal with.  How much is a $1 trillion?

The most graphic way to understand the size of this number is to use a time analogy.

If you started spending $1 million a day, every day, from 1 AD when Jesus Christ was born, through midnight last night (2/9/2012), you would still have about a quarter of a billion dollars left.

That is how big, how bad the $1 trillion number is. But remember, our national debt is now more than $15.3 trillion.  Now think about  the speed with which the government is incurring new liability -- the Baby Boomers who qualify for Medicare coverage at the rate of one every eight seconds.

Do you see the train? Can you begin to imagine how messy this collision will be?

There are way too many leaders who bristle when you suggest that the healthcare industry that we know today will be substantially different over the next five to 10 years.  It will never happen, they argue, the voters will never allow it.

When I hear that argument, two things come to mind:  the newspaper industry and the Greek government.

These dramatic changes may come incrementally, allowing us some time to adjust.  Or the European debt crisis could ignite a global disruption in the credit markets.  No one can be sure when or how fast this financial catastrophe waiting in the wings will occur.  I do know one thing for sure:  the train is on the tracks.

Today's career management tip: now is the least embarrasing time to learn how to adjust to dramatic change.

Sorry, perhaps I should not joke about something this bad.

© 2011 John Gregory Self

New Way to Look at Healthcare

Hospital Chief Executives and their boards, helped (aided and abetted) by their architects, have constructed some impressive hospitals and support facilities.  From humble community hospitals in small towns across America, to the big box medical centers in the regional centers of commerce, more often than not, the image of the hospital is defined by the quality (size) of the building, the technology inside and its medical staff.

Changes in the way healthcare is delivered, both from the Patient Protection and Affordable Care Act (PPACA) and also some rather draconian deficit reduction measures will most assuredly affect Medicare spending.  This could force us to stop looking at buildings as the center of our healthcare delivery universe and to begin to think about population groups and geographical territories.

Buildings will always be central to healthcare delivery.  But instead of focusing on brick and mortar for how and where we should deliver care, CEOs and their employees should shift their focus to their customers, their markets and geographic territory.  This shift, a nuanced course correction in the eyes of some, will become, over time, a central article of faith in terms of how we design our system and allocate resources.  And over time, this rather radical transformation will play a significant role in reducing healthcare costs.

In the end, however, no one initiative will solve our massive and growing healthcare spending challenge.  There are literally hundreds, if not thousands, of transformative changes and tweaks that will have to occur, from the role of EMS in pre-hospital care, to treatment protocols and locale. 

These will be challenging, but exciting times.  Fortunately, we are an industry that has attracted some of the top graduate school talent over the past 10 years.

I am looking forward to this transformation a great deal.

© 2011 John Gregory Self

Editor's Note: HealthCare Voice, John Self's  healthcare blog, will be moving to JohnGSelf.Com, hopefully later this week.  The blog will run on both sites for a couple of weeks and then the content will be exclusively on WWW.JohnGSelf.Com

 

Video Summaries of Candidate Interviews Leads To Greater Success

Video Summaries of your search firm’s recommended candidates can help organizations avoid a costly leadership miss-hire; not video conferencing, which is widely overused in executive search, but edited video summaries of your recruiter’s in-depth face-to-face interview with the candidate.

Using videoconference technology to conduct the defining interviews that will be used to select their recommended candidates is a big mistake, the purported cost expense savings notwithstanding.  Reviewing an edited version of the interview allows the client to make an informed decision as to which of the four or five candidates on the panel should be invited for a site interview.

The proof is in the record of success.  Clients who have used search firms that incorporate video summaries as part of their candidate presentation say that it is “incredibly helpful” in selecting the right candidates .  “In the past, we had to rely solely on the recruiter’s judgment, and in many larger firms, the partner has only limited exposure to the candidate in the screening process,” one CEO said who asked that I not use his name out of concern that there might be negative repercussions.  Anyone who understands how most large consultancies work -- and search firms are consultancies -- knows that the partner is a rainmaker first, a client relationship manager second, and a working consultant a distant third. 

Providing clients video summaries is a game changer in the client-search firm relationship.

The CEO continued that over a seven-year period and 12 searches, “having the videos helped us avoid some big mistakes.  Over that period of time we only had one candidate who did not work out and that individual left after two years and the search firm provided a replacement.”  He is not alone in his assessment.

The cost of a miss-hire at the executive level is extraordinarily costly, from 50 to 500 times the failed executive’s annual base compensation, depending on the size of the company and the that individual’s scope of responsibility.

Using videoconference interviews between the recruiter and candidates for the final panel is penny wise and pound foolish.

© 2011 John Gregory Self

Seed Newsvine

Executive Search: It Is Time for Change

As the business climate experiences dramatic changes in our new normal economy, one industry will face dramatic upheaval:  executive search.

The record of the executive search industry is mediocre even under the best of economic conditions. The time has come for fundamental change and those firms who understand this trend will thrive.  Those who do not, like the vast majority of Fortune 50 companies over the past 50 years, will disappear.

Here is the problem: the search firm business model is more than 50 years old and, unlike most other industries, little has changed from its inception. There are few other business sectors in the world today that have not undergone at least several transformations over their lifetime, but executive search has not changed because there has been no reason: their business grew and recruiters prospered.  Yes, technology like computerized databases, the fax machine, internet connectivity, and video conferencing have facilitated the timeliness of the process, but overall the model is the same: you hire a firm, pay them a retainer and a professional fee based on the successful candidate’s first year base salary or the first year total cash compensation.  When it came to accountability for the quality of a firm’s work, there was either no guarantee that the candidate would be successful and remain with the client, or the recruiter offered a limited one-year guarantee.

There are today some star performers both in the large and regional search firms, but the real creative work that is transforming how the executive search process works, and how you should hold a recruiter accountable for tenure and performance, is occurring in smaller companies  that have greater flexibility to innovate.

Today, the search industry is beginning to see some long overdue transformation. Some of the more introspective firms, including global giant Heidrick & Struggles, realized the changing business climate was upsetting the industry’s long-held and highly profitable business model.  Heidrick & Struggles examined 20,000 of their searches and found that 40 percent of the candidates they placed across all sectors on a global basis quit, were forced out or were fired within 18 months.  Other studies show that 50 percent of the candidates recruited from outside an organization are gone within 24 months. Anecdotally, a large east coast health system which had paid a major global traditional search firm nearly $1 million in professional fees plus expenses in less than 18 months, saw their new executives, save one, leave the organization because of performance or poor match within three years.

Businesses, particularly health systems and hospitals, cannot afford this level of value. 

 There are strategies and processes to dramatically improve the rate of success in recruiting from outside the organization.  Friday, I will share with you how to improve the process and enhance the value -- from search firms and your internal recruiters.

© 2011 John Gregory Self

Seed Newsvine

Bad Firing, Good Firing and the Company Brand

Why would you fire your chief executive officer over the telephone?  Why would anyone want to work for a company that would treat its CEO so shabbily?  Why would you do business with that company?

The sudden dismissal of Yahoo CEO Carol Bartz, reportedly an outspoken, combative, occasionally arrogant and sometimes profane executive, prompted me to think about how companies fire people, and the fact that how companies execute the termination can define an organization's corporate image and recruiting brand.

To be fair to the Yahoo board, Ms. Bartz was reportedly failing to meet performance expectations established by the Directors. There are many on Wall Street who argue that her termination was justified.  Others say that her style made it inevitable. That said, the issue should be not the "why" but the "how."  

There are reasons, justifications -- excuses -- as to why the board acted the way it did. Central among them was that Ms. Bartz was traveling and the board did not want word of their decision to leak before they had spoken to their CEO.  Others speculate that she may have had a clause in her employment contract that required immediate notification of termination. Fine, those are important issues to consider. But here is another:  if the intent was to rid the company of a leader who was failing in order to protect the interests of the brand and its shareholders, why would the board execute their plan of termination in a way that would cast a darker cloud over the already troubled company? 

That Ms. Bartz fired off an email broadside to her employees explaining that she had been fired over the telephone should not have been a surprise to the board or its advisors.  Nor should the resulting damage to  the organization's image.

Boards frequently hire CEOs with fanfare for what they hope will be strong operating results, favorable press, and a strengthening of the corporate brand.  They are almost always disappointed, frustrated, even angry when their best layed plans fall short.  But there is no excuse for the board to make a bad situation worse with a poorly executed plan.

How an organization terminates employees says a lot about the real heart and soul of the company. Taking the high ground may not make the person or persons who have made the decision and who are notifying the employee feel less frustrated, but how they perform this important role will shape the image of the company.

Yahoo is not the lone offender in American business. Thousands of times each day, someone is fired for a myriad of reasons, from poor performance to unethical or inappropriate conduct. There may be reasons to immediately remove the employee from the workplace.  There may be ample justification to have security personnel available.  Even when companies try to terminate someone in the right way, things can go wrong. Fortunately these incidents are the exception.

But companies who do not take the high road, protecting the dignity of the outgoing employee including complimenting the employee for their accomplishments and wishing them well while keeping security out of the room and the prying eyes of their colleagues at bay, are being short-sighted.  

Miss-hires, at whatever level, are a costly mistake, but to make the matter worse by ending the employment relationship badly simply multiplies the problem.

© 2011 John Gregory Self

Seed Newsvine

4 Questions Physician Candidates Should Ask Recruiters

There are four critical questions I believe that physicians should ask before submitting to the wooing calls of a recruiter.

I need to disclose that I began my search career recruiting physicians. Secondly, while I no longer recruit physicians strictly for clinical practice, I am involved in recruiting physicians for C-Suite and executive leadership positions. 

The American College of Physician Executives' LINKEDIN site is currently featuring an interesting discussion on this very subject.  I made some comments there but I wanted to bring them across to my blog for your review and comment.  If you are a LINKEDIN member I urge to visit this page.

Physicians can quickly and effectively "qualify" the recruiter and the opportunity by asking these questions. 

1.  Is the recruiter working on an exclusive, retained basis or with a non-exclusive contingency contract?  

Be wary of the non-exclusive agreements. Success in the latter case comes by submitting as many "qualified" candidates as possible, as quickly as possible. In this scenario, it is primarily a metrics game -- if a recruiter submits more candidates before their competitor, they will have a better percentage of closing the deal.  With this approach the physician's interest typically becomes secondary. It is about the commission and recruiters working in this environment, and in a few of the big "mill" retained firms, are pressured to close deals. 

 2.  What type of placement guarantee is the recruiter offering the client?

As a candidate, this is one of the most important questions you can ask.  Why?  No placement guarantee, or anything less than a 1-2 year guarantee, means they do not have much skin in the game, except their reputation.  Research suggests that most physicians stay at least a year so equal or less time is not much of a guarantee. Physicians should care because the more risk the recruiter has, the more concerned he or she will be in ensuring the "fit" is right and that the physician candidates have a complete and accurate understanding of the opportunity. In other words, alignment of interests.

3.  Are you getting full disclosure?  

Every organization, from Mayo and the Cleveland Clinic to a multi-specialty clinic in rural Alabama, has issues that they would rather physicians not know about before they sign. I refer to this as the "good, the bad and the ugly." One clinic did not like to disclose their turnover rate -- it seems their attractive comp plan was attractive on paper, not in practice. The recruiter, who had a 6-month placement guarantee -- which is to say no guarantee -- was practicing the search equivalent of "don't ask, don't tell." In one year, 6 physicians left the practice. Their turnover was 50% at 24 months, according to the CEO of the neighboring hospital who quit providing income guarantees until the parnters in the practice agreed to full disclosure of their good, bad and ugly issues. 

4.  Is the recruiter going to send you written information disclosing all the essential elements of the practice -- salary, benefits, and the good, the bad and the ugly?

If they can't or won't, run, do not walk, away. 

Some recruiters will argue this is an unrealistic model. I would argue that is exactly why this segment of the recruiting industry "enjoys" so much criticism.

Physicians, who were once at the top of the healthcare food chain in terms of earnings and importance when I began my career in the mid-1970s, should not be treated less appropriately in the recruiting process than other healthcare executives. But that is exactly what is happening in far too many cases day in and day out.

© 2011 John Gregory Self

Seed Newsvine

Going Out On A Limb...Not Really

In one of the silliest of debates in the world of healthcare, challenging economic times and the inevitable cuts in reimbursement from healthcare reform and deficit reduction have fueled a renewal of the endless haggling over who is better: not-for-profit or investor-owned hospitals?

Let's cut to the chase:  the winner is/will be those hospitals that achieve superior results in terms of quality, safety and patient satisfaction.  Who cares about the ownership structure?

I have worked in the healthcare industry for more than 30 years.   When I first went to work for Hermann Hospital in Houston as a young PR director and the first director of Life Flight in early 1976, there were actually more investor-owned hospitals in the market than the staid non-profit behemoths of tertiary care.  While the big tertiary care facilities that took care of the sickest patients were tax-exempt, the hard-charging investor-owned community facilities reshaped the market dynamics in terms of competition, the speed with which business decisions were made, and their ground-breaking efficiency.

Today, the pros and cons of which ownership model is superior are once again being debated.  The truth is that both ownership structures are fraught with weaknesses that healthcare reform and the ongoing deficit/debt reduction efforts will challenge.  

Who will win?  To borrow a line from the late Molly Ivins, a newspaper columnist who covered Texas politics for decades, "I am going to go out on a limb and tell you that I haven't a clue."  That said, I do know what will be the deciding factor.  Quality people.  Organizations that recruit and retain the best talent and who understand the consequences of the "new normal" and the lower rates of reimbursement, will end up on top.  If you do not hire and retain the best people, it is impossible to compete in a hyper-challenging financial/business model transformation.

Eventually, when the financial squeeze reaches painful levels, ownership structure will certainly come into play.  I think I know how it will play out, but that is a conversation for a different day. There are so many policy/reimbursement issues about which hospital CEOs have so little control   For now, if you are a hospital CEO, pay attention to the most important variable you can control:  the quality of people you hire and the rate of retention. That is one of the most important things you will do as THE leader.

© 2011 John Gregory Self

Seed Newsvine

OK, Here's the Deal

Several months ago, I announced that I was going to shift from writing a blog exclusive to healthcare to more general interest issues. I promised that I would get back to you when my plans came together. All I can say is that best made plans are subject to change. So, here's the deal.

I am going to continue with HealthCare Voice. The focus will remain on healthcare leadership, strategy, career management, talent acquisition, retention, team development, etc.  My brand advisors and some of my valued readers encouraged me not to stray from my original intent. So, I changed my mind.  

HealthCare Voice will continue to appear at least twice a week.  In the near future it will be moved to my website, JohnGSelf.Com which is being expanded by my capable marketing team at Brandnu Marketing, a DFW firm that specializes in helping organizations enhance their brands and grow their businesses.  HealthCare Voice will feature a new design but will offer the same subscription and push distributition capabilities (which means RSS or email alerts). I will get back with you before the site is changed so that you can renew your subscription or RSS feed based on the new URL.

Plans for a general interest blog in support of my public speaking business are in full swing. This blog will focus on a variety of subjects about which I have a strong interest. More on this later.

© 2011 John Gregory Self

Seed Newsvine

EXECUTIVE RECRUITMENT: Can You Afford Average?

It is a recurring question -- how can I be sure that I am hiring the right executive and that once they join will they stay?

In all honesty, when dealing with people, there are no absolutes.  But with the right search consultant -- internal or with a firm -- and a gold-plated recruiting/candidate screening process, you can substantially mitigate the risks. However, let the buyer beware:  if your executive search firm uses terms like “job order”, “hiring authority” or “fill rate”, more than likely they are a placement agency or staffing company trying to move up the financial ladder.  

The real secret to success in executive search is to select a partner or search consultant who possesses some important skills.  First and foremost, success in executive search is not tied to the number of years of experience.  That is helpful, but if the consultant lacks a particular set of skills necessary for success, years of experience will ensure only that you are buying experienced mediocrity.  Nor is the size of the firm of any consequence unless your organization is a multinational operator and geographic reach is important.  No, the secret lies in the search consultant who will be doing the majority of the work.  Does this person possess a deep understanding of the culture of the organization -- the values, the rules governing interpersonal relationships, and how decisions are made?  Do they require complete transparency regarding performance expectations, details regarding the hurdles that must be overcome to achieve success, and identification of the always dangerous sacred cows?  The consultant must insist that the client lose their natural desire to put their best foot forward while obscuring important problems or challenges that will become the organizational equivalent of an IED - improvised explosive device -- with career-limiting consequences.

Is the consultant who will do most of the work on your search, save perhaps the candidate's final interview with the engagement partner, present for the all important site work, or are they closeted away in the Firm’s office working on other projects?  (That is the most common model in the search industry.)

If your consultant does not force you to deal with the tough issues, do not be surprised if the outcome is only average.  Executive search is like dating and marriage -- decisions are made after four or five dates.   If the search does not force the client to deal with always-present nasty little details in advance of the marriage, there is a good possibility that it will not be a long and productive relationship and the divorce will be messy and costly.  

The truth is that far too many executive recruiters practice what I call “don’t ask, don’t tell”  recruiting. The partner signs the engagement, a consultant who may, or may not have been present for the site work, prepares a superficial job description and if the candidate doesn’t ask about the culture or potential problems that could affect their success, the search firm does not tell.  Oh, the big firms deny that is the case, but I have interviewed far too many candidates who say otherwise.

How confident is the search firm in their ability to find a candidate who will deliver value to the organization?  To test a search firm's true mettle, ask the partner in charge if they will guarantee their work for an extended period of time and listen for the reasons they do not.  Most firms offer a 12-month placement guarantee.  That is average.  There are one or two firms competing in the healthcare provider segment who will offer an extended placement guarantee, but they are the exception.

So the answer to the question is, in the end, really this:  Given the cost of an executive search -- professional fees plus an overhead assessment and travel costs:  Can you afford average?

© 2011 John Gregory Self

Seed Newsvine

Five Reasons Hospital CEOs Get Fired

From Anchorage Alaska

Hospital CEOs have their hands full.  They face a boiling cauldron of operational, financial and competitive challenges – any of which could prove career limiting.  Surprisingly, however, many CEOs fail not because they lacked knowledge or expertise in running a hospital or dealing with the myriad of threats.  Rather the fastest-track to a severance agreement, or unceremoniously escorted from the building, can be found in five major failings.

 The overarching principles on this subject are two-fold:  First, CEOs and senior executives should know themselves. The second “first” rule is that CEOs should do no harm to the employees they lead or the customers they serve.  CEOs who keep their eyes on these balls will typically do well, all other things equal – knowledge, talent, and expertise.

So why do CEOs get fired?  More often than not it is style, or lack of political sensitivity, that will be a CEO’s undoing.  In more than 30 years in healthcare leadership – 17 years in executive recruiting – I have seen senior executives run aground many times over because they lacked the sensitivity to read, understand and adjust to the shifting political and marketplace sands that exist in virtually every health system or hospital, from the governing board and medical staff to the hourly employees who do the really important work.

Here are the five sure-fire issues that will get a CEO fired.

1. Micromanage your team - Micromanagers are like amateurs masquerading as "in-the-know" leaders. Let's be honest, if you have to get that involved in the operations of the enterprise, you are not hiring the right people.  When you micromanage, you destroy morale, and disrupt service.  You show me a hospital CEO or COO who is a micromanager and I will show you an organization that is, or will, suffer quality and  patient safety problems, and, eventually, poor financial performance.
2.  Be a Bully - There is no place in leadership for bullies/abusive leaders.  If you have to use anger, intimidation, or abuse to achieve targeted results, or if you enjoy calling out subordinates and humiliating them in front of their peers, you might want to reconsider changing careers. Your employees -- and your customers --  will be delighted you have left. In short, if you think that approach to management is smart leadership, you do not belong in healthcare.  Management and employee turnover is dangerous for your patients and it is very expensive.  The only way a CEO with this particular mortal sin can hold on to their job is if they work for an incredibly toxic board or a ridiculously misguided corporate entity that equates this type of boorish behavior with “tough” leadership.  There is no accounting for stupidity that manifest itself in this type of misguided and misinformed corporate or governing board oversight.
3. Ignore Your Customers – That is perhaps one of the biggest – and most common – sins in healthcare today.  Take care of your customers. They will take care of you (and your career).  Steve Jobs and Apple blew past Microsoft in terms of market cap, not because they treated their customers with dismissive indifference, but because they were passionately focused on offering an extraordinary customer experience – exceptional quality and best-in-industry service.  Day in and day out, Apple employees focus on their customers – meeting their needs with enthusiasm that is fueled by a belief that they are working for an outstanding company “that gets it.”  Fighting with your customers (read: physicians) – even though they may also be your competitors at some point in the day – is a bad idea.  It demonstrates, without equivocation, that you do not get it.  As a savvy politician once said, never fight with a man who buys printer’s ink by the barrel.  Taking a my-way-or-the-highway posture with the people who admit patients and generate revenue or the board members who evaluate your performance is a really bad idea.  As CEO, you are supposed to be on top of the emerging trends.  If your physicians are concerned with their revenue, be a partner, not an adversary. That point is not rocket science but you would be surprised how many CEO terminations can be traced to an arrogant belief that you can fight with your customers and still be a winner.
4. Excel in self-importance – CEOs, you should (read: must) check your ego at the front door.  It is not about you.  It IS about the people you serve.  In a crummy economy, the smart leaders are the ones who walk the floors and talk to their employees – on all shifts, all the time – looking for ways to improve quality and service, how they can make a meaningful difference in the lives of those who, day in and day out, actually do the work.  CEOs should regularly visit their physicians – all of them – on their turf.  Listen, learn.  This is not for show.  The employees and the physicians know when they are being taken seriously and they appreciate the effort.  So many CEOs fail to build this reservoir of goodwill that will be essential to survive the inevitable crisis that will occur during a standard tenure of five to seven years.  CEOs have all sorts of excuses why they can’t do this (I have heard most of them), but when the board makes the decisions to terminate, remember your lame excuses and then decide if you like the feeling of getting the boot.
5. Be a Phantom CEO -- You cannot lead from behind closed doors and a cadre of assistants who shield you from your customers and those who actually do the work that generates the revenue.   Stop trying.  In plain terms, do not build walls or a honking big silo of reinforced concrete around yourself.  CEOs should not let their fears or insecurities make them a prisoner of the executive suite, venturing out only for the weekly manager’s meeting or occasional hospital-wide event.  A CEO once told me, “I just do not feel comfortable interacting with the employees without others being with me.”  Insecurity is the stuff that walls and silos are made of.  Get a coach and get over it. Or get an outplacement adviser.  You will need one

Bonus Reason:  Avoid Accountability. Blame others for your failings.  Your       subordinates will really love you for that one.  Do the opposite.  Be accountable.         No one likes a leader who is full of excuses, who dodges accountability.  Revel in       being responsible for the success of the organization. Take joy in the challenge.         Talk about it constantly and hold others accountable.  That is a powerful       message.  No one likes a dodger who is better at excuses than results

© 2011 John Gregory Self

  Seed Newsvine

Health Systems, Hospitals Got It Right

Because I am not shy about criticizing or challenging my industry – healthcare – when we fail to live up to our mission of quality/safer patient care and support for the communities we serve, I owe it to my colleagues to voice my support when I believe they get it right.  They have in one very important area.

Executive compensation continues to be a hot subject both in the U.S. and Europe.  Not a week goes by without a news report, analysis or essay on the subject. While the current lightning rod is the large investment banks, there are far too many public corporations that are guilty of bad practices in how they pay their executives and how they explain it publicly.  

The central issues giving life to this continuing flow of coverage on the subject are the size of the base salaries and/or bonuses, the relationship between the pay for some easily understood performance metric, and the rights of shareholders – or the lack thereof – when the “owners” of the company are not happy with size or justification for the genrous awards.

Executive compensation issues and the financial community’s sense of entitlement, continues to irk regulators, millions of small business owners and “average Joes” everywhere.  The large banks single handedly drove this country to the verge of a global credit market contagion.  However, the continuing problems and lack of transparency in executive compensation are not confined to the banks.  There are hundreds of examples of corporations throughout the U.S. and Europe that treat shareholders as troublemakers of the worst sort if they deign to believe they are entitled to any rights  to have a meaningful say on this issue.

In healthcare delivery, we have kept our wits about us on executive compensation when other industrial and service sectors lost their way. We are not perfect, but our industry does remarkably well, all things considered. 

While there are health system and hospital CEOs who earn high six and low seven-figure incomes – and they are the exception – there are few examples where the size of compensation of a hospital CEO is inconsistent with the scope of responsibility and the complexity of the challenges these executives face.  In fact, there are examples aplenty of hospital CEOs of difficult-to-manage public and mid-sized community hospitals who are underpaid for the work they do and the results they produce. 

I am not going to discuss the payor or pharmaceutical segments because I lack the expertise.  My search firm does not work in those areas, but I believe there are certainly examples of these bad  compensation practices in the health insurance, technology, and pharmaceutical segments.

Health system and hospital boards, for the most part, are responsive to their communities and tend to be prudent in evaluating the CEO and how they pay him or her for the results they produce.  No, community boards are not as transparent as they should be in some markets, but even in the worst of cases, they are infinitely more responsive than the boards of far too many major public corporations who have created more rules and hurdles to block true shareholder input into how the company is run.  It is a maddening situation for many mom and pop investors, and increasing numbers of institutional investors, who are tiring of the corporate arrogance and greed.

Hopefully, as community healthcare organizations deal with the immense challenges that are part and parcel of our “new normal” economy, persistent high unemployment and anemic growth rates, their boards will become more transparent, not less, and more communicative, not less, regarding the size and scope of their community benefit which is how they justify their tax-exempt status.

Big corporations may have a legal requirement to be more forthcoming, but community healthcare providers have a moral and ethical duty.  And there is a big difference. 

 

© 2011 John Gregory Self

Seed Newsvine

Don't Look Now, But...

 

POLITICO Breaking News
-------------------------------------------------

WASHINGTON -- President Obama, House Speaker John Boehner and Senate Majority Leader Harry Reid didn't reach a deal on the budget after a Thursday afternoon meeting. Outside the White House, Reid told reporters that they would reconvene at 7 p.m. "We're going to continue to work to get this done," he said – or else face "the bad day tomorrow, which is the government shutdown."

JGS Comments:

While the national deficit continues to rise -- it  is $14.268 trillion as of this morning -- Congress remains deadlocked over about $7 billion in cuts -- an amount equivalent to what  the federal government spends in 17 hours.  

This is tantamount to arguing over a bar tab on the Titanic, says David Walker, a leading fiscal responsibility hawk who believes that our national deficit and debt crisis are much worse than advertised. You may remember him as the former Comptroller of the U.S. Public Accounts under President George W. Bush who appeared in 2007 on 60 Minutes to decry reckless government spending.  Four years later, Democrats and Republicans are nearly paralyzed by factions in their respective parties and an ongoing obsession with the next election cycle. 

Meanwhile, Congressman Paul Ryan's long awaited budget proposal is now on the record.  It is notable for what it includes -- entitlement reform.   Mr. Ryan's budget ideas will directly impact healthcare because his approach to reform assumes, in part, that we will markedly reduce our costs.

It is equally notable for what it does not address:  revenue and military spending. 

We enter this grave period in our history as a nation divided.  The only cuts in spending  that the majority of Americans agree on is foreign aid.  Too bad that accounts for only one percent of federal spending.

A cynical reading of those recent public opinion polls suggests that Mr. Ryan's proposal -- an honest effort worthy of public debate whether you agree with his ideas or not  -- will stir up the hornet's nest since America seems to be saying they want smaller government but do not touch Social Security, Medicare and defense spending. 

In addition to opposing cuts to the aforementioned programs, the voters  do not want any new taxes.  In other words, Americans want government services, they just do not want to pay for them.

This will really make our creditors happy.

If this rather sad disconnect with reality continues, and the bond markets lose confidence in this nation's ability to meet its financial obligations because of continued unchecked deficits, there will be dire consequences.  The bond markets who can, and will, impose their requirements for fiscal discipline,  will not care what the voters want or do not want.   They will not care what the healthcare industry says.   Our borrowing costs will soar and the U.S. will be left with no option but to comply with the demands of our" bankers".

How does that strike you?  The most powerful nation in the history of the world being bossed around by  China, which owns $1 trillion in U.S. debt, and other domestic and international bond funds who do not care what we think or want.  They will not care about the next election cycle -- who wins and who loses.

This is not a consequence for our next generation.  This is a crisis in the here and now.   Mr. Walker and others are warning that our debt smackdown could happen at any time -- when the people who hold U.S. debt give up on our government's abillity to solve this one very big, very threatening problem.  

If you like what is happening in Ireland, Greece and now Portugal, you will love this epic calamity in the making.  However, reaching a budget agreement before the government shutdown at midnight on Friday does nothing to solve our crushing debt problem. The larger debate will be game changing for the healthcare industry.

 

© 2011 John Gregory Self

Seed Newsvine

Can Bad Behavior Be Acceptable Behavior?

Should a business hire an executive with an impressive record of accomplishment in improving operations and financial performance who is "high profile, charismatic  and dynamic"  even though reference reports suggest that he  has a temper and that his personal assistants (PA) find him impossible: he had plowed through more than a dozen PA's in two years?  Do the positives outweigh his negatives?

That was the question posed in a recent "Dear Lucy" column in the Financial Times, the globally focused daily business newspaper based in London.

Lucy's example implied that the company in question was a public corporation, prompting one reader to respond that yes, the company should hire him since the executive "...has hit all the right numbers.  No PA (personal assistant) will be able to do that for you. Numbers speak for themselves." The reader continued, "If he was truly an unreasonable bully then he wouldn't have been able to achieve what he has."  The reader concluded that the real problem was with the employment agency who clearly was not providing good PA candidates.

Another reader wrote, "If Napoleon, Montgomery or Churchill had been judged by their abilities to control their tempers, they would have never become leaders."  This reader's suggestion:  "If he is good, hire him and hire an ex-Marine or ex-professional rugby player as a PA."  Another reader commented that while the board should hire that executive, they should tie his financial performance to his PA turnover rate.

While reader comments were surprisingly evenly divided as to whether the board should hire or pass on the candidate, Lucy offered what I thought was a unique perspective, one that the whole of the healthcare industry should take to heart. If the executive was running a hedge fund, making vast amounts of money for his investors and himself, while making sizeable donations to a wide array of charities with his personal profits, then his mammoth temper tantrums might be "just about OK" given the line of work he was in. "The world would have been a poorer place had his beastly PA habit barred his advance."

But Lucy draws a line in hiring a volatile leader for other types of businesses.  "If your company makes ball bearings or sells groceries, I wouldn't even consider him.  The job of a chief executive isn't just to be dynamic, and charismatic and high profile.  It is to set the tone in the organization.  It is to recruit the right people and make them stay."  She concludes that when there is a revolving door in the PA's office, it is clear that the CEO has no idea how to begin to set the right tone for the enterprise.  I agree.

As financial pressures on healthcare organizations mount, and as some hospitals plunge into a dark abyss requiring an extraordinary executive to lead a rescue, boards must exercise great caution in vetting the performance of the CEO they choose. They must pay particular attention to the candidate's reputation and leadership style.

While CEO bullies have succeeded in the past, we are entering a new era in healthcare, an era that will be characterized by changes in traditional relationships, financial incentives, and serious challenges that will be exacerbated by anticipated sharply lower rates of reimbursement.  This important shift requires a new type of executive with a leadership style that can bring sustainable change.

When a hospital is in trouble and its future is in the balance, it is tempting to hire the toughest turnaround leader available, regardless of their personality and/or reported prior bad behavior.  Health systems need leaders with a healthy attitude to achieve sustainable success.  That is something yelling bullies cannot do.   

_________________________________

My post on Tuesday -- the third in a series of articles -- will focus on techniques for executives who have yet to master the fundamentals of professional networking. \

Have a great weekend. I am off to the weekend home where I will attempt to achieve life balance:  completing the "honey dos", getting caught on work, and R&R.

© 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.

 

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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

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BLOG SPECIAL: THE IDITAROD - A Unique, Grueling Alaska Experience

ANCHORAGE.   I am in Anchorage advising a client in connection with a senior executive placement.  It was my good luck to arrive in time to witness the ceremonial start of the 39th Iditarod -- the last great race on earth -- in downtown Anchorage.

Saturday's festivities, attended by thousands in one big tailgate party and winter carnival, was an exciting, and very cold build up, to the real race which began Sunday in Willow, AK.

"Today is a winter festival," an announcer boomed over the public address system. "Tomorrow begins a big old sweaty dog race." 

Sixty-three contestants -- Mushers and their dog teams -- will endure grueling conditions for the next 10 to 17 days over a more than 1,000 mile course to Nome through regions of this vast state that only dog sled teams go.  Even with GPS technology on each sled, Mushers face daunting challenges, including getting lost in nasty snow storms. This sport is not for the faint of heart or  weak of body and spirit.  Racers will experience bitter cold, brutal headwinds, and hallucinations resulting from loss of sleep. Truth is that the Mushers will take better care of their dogs than themselves during this 10+ days of the race. Before the race the dogs, which are bred to run and get stronger as the race progresses, are thoroughly evaluated by veterinarians.  That does not stop critics from labeling this event as animal cruelty.  

At race time on a cloudless Saturday morning, the temperature was about 2 degrees in downtown. I won't kid you, I was cold. Really cold. But judging by the elbow-to-elbow crowds in the bars, coffee houses and restaurants, I wasn't the only one who needed a break to warm up.

For me, this was a fascinating experience and an opportunity to learn more about this unique state.  Here are some race facts about this race and dog sledding that I found interesting:

• Iditarod is a ghost town that is located on the southern course. Each year the race alternates between the longer northern course and the southern route which is known for its bitter headwinds. This year the race is using the southern course.
  
• This year's entrants include Mushers from Stonehaven, Scotland; Aukland, New Zealand; St. Anne, Jamaica; a funeral director known as the "Mushing Mortician" from Anchorage; and a 62-year-old physician from Chattanooga, TN.
• There are 11 women in this year's field of entrants.  The first woman to win was Libby Riddles in 1985.  Susan Butcher, perhaps the best known woman to win the race, won her first time in 1986 and was the first racer to win four out of five sequential years. She is the second four-time winner. Ms. Butcher died of a virulent form of Leukemia in 2003. 
• DeeDee Jonrow, a fan favorite and breast cancer survivor, entered the 2003 Iditarod, three weeks after completing chemotherapy. A 27-race veteran, this native of Frankfurt, Germany has not been out of the top 25 since 1984.  In her 27 races, she has won more than $472,128.
• The ceremonial route is 11-miles long.  Because there has been no recent snow, and given the city's excellent snow removal program, snow that was stockpiled for weeks, is brought in to create a manicured course. Mushers invite friends to ride with them in the sled for the Saturday run, or they tow another sled, to add weight to keep the dogs for going too fast.
  
• Each Musher is required to carry the following equipment in the actual race: An ax with a handle at least 22 inches long, snowshoes, promotional materials provided by the race committee (yeah, believe it or not), eight booties for each dog on the team, cooker and pot capable of boiling at least three gallons of water at one time, veterinarian notebooks that are reviewed by a veterinarian at each checkpoint, fuel and a cable gang line capable of securing a dog team.
• A 1925 Diphtheria epidemic in Nome was ravaging children.  A train delivered the needed serum to the town of Neema, the end of the rail line.  Dog sledding teams carried the drug the last 674 miles in 24-hour shifts. Thousands of lives were saved, and dog sledding earned an important part of this state's extraordinary history.
  

I have uploaded additional photographs on my Facebook page.  http://on.fb.me/hy19hN

 © 2011 John Gregory Self

Seed Newsvine

That Other Potential Calamity for Healthcare

When some public policy calamity strikes, people tremble with fear or anger and they cry out:  "Why didn't someone warn us?  Why didn't someone tell us that there were bad consequences?  We do not want this pain!"

That is a reasonable request, especially for healthcare leaders who are already facing unprecedented challenges that threaten to dramatically change the way we do business. In responding, let me borrow a quote from Mike Moncrief, Fort Worth's mayor and a former county judge, who once said about a major change in EMS service for his community, "The train is on the tracks.  You are either on the train or on the tracks."

Now, which train are we talking about -- the Patient Protection and Affordable Care Act (PPACA) -- the so-called Obamacare plan -- or something far more sinister.  The answer to that question is easy:  something far more sinister. It is the fat, smelly elephant in the room that no one wants to look at, much less talk about: the skyrocketing and soon-to-be catastrophic debt crisis.  Healthcare executives -- it is time to step up to the leadership plate to prepare to deal with this very real possibility.

I try to stay away from politics in this space, but this issue is too important for me not to comment.  Hopefully, you will agree that this is truly a bipartisan train wreck.  The proposed GOP  House plan, which many know will probably never see the light of day, is more about ideology and a political principle than good policy.  Their proposed $61 billion in budget cuts comes from about 12 percent of the annual budget that is known as discretionary spending.  While $61 billion is serious money, and many in the GOP would argue that it represents a good start, it is woefully inadequate given the size of the deficit and our long-term debt.  In other words, this approach, without commitments to a sustainable policy of reduced spending over the long term will not keep the bond vigilantes away from our door. You simply cannot balance the budget by reducing discretionary spending.

The Democratic position is equally ludicrous.  Democratic defenders argue that the White House's initial plan was only a starting point for prolonged negotiations to craft a meaningful spending plan.  That line of defense of the President's approach is akin to a timid man whistling while passing a graveyard. You knew we were in trouble from a leadership perspective when the President said that he and the Republicans had "to step in the boat at the same time."  If a hospital CEO tried that approach with his medical staff when it came to a critically tough decision, there would be blood on the floor.

If the bond market decides that the U.S. is unable or unwilling to come to grips with the deficit and debt crisis, the consequences will be "abrupt, swift and painful beyond our wildest projections," argues David Walker, former Comptroller of the U.S. Public Accounts under George W. Bush.  Recently, while serving as a guest host on CNBC's Squawk Box morning show, he predicted that the crisis, now challenging debtor nations in the Euro zone, will visit the U.S.  shores within the next three to five years, if not sooner.  When it occurs, he posits, and it could happen at any time, the U.S. government's ability to continue borrowing, and refinancing existing debt, will become so expensive -- assuming anyone will lend to us at all -- that it will wreck our way of life as we know it today.

Healthcare providers will be at the nexus of this calamity. Regardless of what we say, the excuses we use and the promises we make, it will be too late.  Our economy, our industry will face an immediate restructuring, the type that is found only in the the most desperate of bankruptcies: It will be "abrupt, swift and painful beyond our wildest projections."

So why aren't we hearing more about this potential calamity from the healthcare trade press?  For the same reason that most futurists/after dinner speakers, and others who know better, are avoiding the subject.  Perhaps it is that we cannot imagine a system of care that is not like the one we have today, or perhaps it is simply that people will not pay good money for speeches who produce more heartburn than good feelings and laughs.   

This is a time when leadership must rise to the surface.  Leadership is not only about leading an organization for today, it also about the ability to anticipate how market and financial forces will shape its future, and to prepare the business to adapt.

© 2011 John Gregory Self

Seed Newsvine

What Would You Do?

So, here is the $64 million dollar question for hospital CEOs.  You learn that in the next 12 months the federal government is planning substantial cuts in Medicare reimbursement. Big cuts to balance the budget.  Moreover, CMS announces that all Medicare payments in 2012 will be tied directly to quality of care, patient safety, and customer satisfaction performance measures. Managed care payors announce that they will follow the government's lead. They, too, will join in the plan to bundle payments to providers, forcing immediate financial collaboration between physicians and hospitals.

This reflects a potentially devastating change for hospitals and physician practices, the perfect storm. This is the REAL sea change that consultants have been harping about for years.

To survive, hospital CEOs must take dramatic action including reducing costs by at least 7 to 10 percent below current Medicare rates. Quality of care -- using a variation of pay for performance formulas -- will be the key driver for all future payments. If hospitals do not measure up, they will get less, a lot less.

What will you do?   How will you restructure your organization?

This is no hypothetical scenario.  Today it may be just a fear, fodder for blogs, subject matter for futurists, and the inevitable journal articles about the doom and gloom future of healthcare.  But just around the corner, much sooner than later, it will be a reality.  

I have incredible confidence in the quality of U.S. healthcare leadership.  I know that, if challenged in this way, the vast majority of healthcare executives and physicians will respond in a dynamic and productive way. There is, in most executive suites, an untapped reservoir of extraordinary ideas and creativity that will lead to a new vision for the U.S. healthcare system.

However, most CEOs today are reluctant to advance these extraordinary ideas because we are an industry that is not comfortable with sudden change. Consequently we focus on what is safe in terms of strategy and innovation. But we are nearing that economic/reimbursement tipping point.

This is a subject worth thinking about.  What will you do?

© 2011 John Gregory Self

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Don't Be Afraid...

When I faced tough, gut-wrenching challenges with a former job, a trusted adviser and friend urged me to come to grips with the inevitable.  "Quit making excuses.  The dysfunction is killing you; it is suffocating your spirit."

He was right.

For so many years, I had seen the handwriting on the wall, but I worked overtime at making all the excuses for avoiding the ultimate tough decision.  However, when I came to grips with the facts and decided to leave, it was as if the curtains opened, the seas parted, and the answers to all those debilitating issues that I had rationalized for years suddenly seemed so clear cut. I kept asking myself, 'What took you so long?' 

I am not alone in making this mistake.  

In our new economy, healthcare leaders will be tested as never before.  Leaders must not be afraid to ask for help. "I can't do that," one CEO said, explaining that his board might conclude that his request for support would signal that he was not the right man for the job "...and they will push me out."

If that is true, what is going to change in 2011, 2012 or 2013 when the Medicare reimbursement is repeatedly cut and the challenges only become more problematic? 

Leadership is about confidence and courage.  But it is also about admitting when you need help to address a major issue.  There is not a top health system or hospital CEO in the country that is going to have all the answers to the challenges that will assail our industry. The smart guys know why and when to ask for additional resources.  They know that waiting will only prolong the agony and increase the financial consequences.

Executives who allow themselves to become trapped by the myriad of reasons why they cannot change, or why they cannot ask for help, will learn that those reasons are, in reality, only the lies we tell ourselves to justify why we do not take bold action, why we will sacrifice our mission and our vision for a less riskier game of "small ball."

I have been there. But once I got over that mental barrier to deal with what I thought were insurmountable issues, I opened a new career door.  Today I am happier than I have been in years, doing what I love to do.

I am not an exception.  You, too, can make the tough decision and find great happiness and career satisfaction.

© 2011 John Gregory Self

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Balancing The Budget Without Medicare Cuts: You Try It

Hospital executives across America are warily eying the new Congress which will take over the first week in January.  

The House of Representatives is now solidly in GOP control and its members are decidedly more conservative and adamant that the size of government be reduced, that annual budget deficits be eliminated, and that future spending policies be geared to reducing the national debt. That could spell big trouble for hospitals, physicians and other providers since deficit reduction/elimination will require spending cuts, probably including further reductions in Medicare reimbursements.

 This nation's drive toward fiscal responsibility will be tumultuous.  As a nation, shared sacrifice and common good are no longer high on the list of admirable American values. We are also a nation of well-financed special interests which means there will be great temptation for Congress, yet again, to kick the can down the road again.  Except, now that we have already entered the dead-end section of road to fiscal responsibility, we do not have much room to wiggle around. Many economists and political leaders from both parties believe that further delays will only result in a financial crisis of epic proportions.

So how do we cut the spending and avert this crisis?  We talk about sacrifice for the common good, but what does that really mean? Significant reductions in spending will be necessary, but what programs will be affected?

Do you think you can make the tough choices that will be necessary to solve the problem?

The New York Times crafted a budget cutting exercise in its Sunday's Week In Review Section.  It provides readers with budget cutting alternatives to cut $1.345 trillion from the 2030 budget, the year where many believe that the full impact of baby boomers will be felt in terms of spending on Social Security and Medicare.  The Times scenarios include almost triple the revenue cuts and tax increases needed to solve this mounting financial crisis, allowing you the option to ignore choices you do not want to make.  Of course, Congress will have more alternatives at their disposal, including their now famous creative accounting, but the Social Security surplus which enabled President Clinton to achieve budget surpluses, will be  long gone at that point and Medicare and Social Security will be major contributors to deficit spending.  

Here is the link. Click Here or cut or paste this address in your browser. http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html.

I was able to do it without capping Medicare spending at GDP plus one percent, but it took deep cuts in spending from other programs, including defense, along with some tax increases. It is important to remember that as I made the tough choices we hear so much about, that I didn't have any lobbyists or political contributors beating me over the head while I did it.  

Finally, you must remember that these tough choices only limit future annual deficits, they do not address the overall national debt which as of 7:30 AM Monday, November 15 is $13,738,736,868,863.89. If you want to see how much it has increased since this writing, click the U.S. National Debt Clock. And if you want to write a check for your share, they will provide that amount to you as well.  But be warned, it is a depressingly large number.

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Human Capital? No, They Are People!

I have an admission to make.  I got caught up in consultant speak. I succumbed to the temptation to use cool, CNBC-style jargon.

One term in particular was finding its way into my writing, my speeches and the Firm’s marketing materials. 

The offending phrase did not seem all that bad when I used it the first time -- coincidentally after reading a McKinsey & Company global research report.   Over the past two years I have continued to use the phrase, insensitive to its true meaning – and the negative implications.  But no more.  I have sworn it off. In fact, I am embarrassed that I even used it at all.

The offending phrase? Human capital, a term that “is inherently dehumanizing and helps explain why employee disengagement is so rampant” a serious problem that will feed excessive turnover that will certainly occur when the economy begins the inevitable recovery.  This interesting and I believe accurate assessment comes from Jon Picoult, founder and principal of Watermark Consulting in Simsbury, CT. 

A Fortune 500  executive has argued that human capital “is really no different than any other type of capital equipment, like aircraft. You’ve got to develop and maintain people, just like planes to make sure you get a good long-term in your investment,” the executive explained to Mr. Picoult who wrote “Here Comes A Turnover Storm” for the business section of Sunday’s New York Times. “Lost in the analogy is the fact that capital assets like aircraft depreciate over time.  From an accounting and a market-value, they’re gradually worth less. Eventually, they’re written off entirely.

“So what message are companies sending to their employees when they wave the human capital banner?” Mr. Picoult asks. 

“People are not equipment.  They’re not investment capital.  They have needs, wants, aspirations, worries, insecurities and lives out of work.  Companies that recognize this fact will shape their employer-employee interactions accordingly,” Mr. Picoult writes. “These companies and their managers become more communicative, more appreciative, more connected and more civil.  In a word they become more human.”

The employee loyalty created by this approach can be striking, Mr. Picoult correctly argues.

As the economic recovery takes hold, companies will scramble to capture these disaffected employees.  In healthcare, given the technical and skills requirements for a majority of the jobs, the competition for these employees will be fierce. With the certainty of reductions in Medicare and commercial insurance reimbursement will that lower revenue, employee turnover and recruitment will take center stage as costs that must be measured and managed.  There simply will be no room in the profit profile of American hospitals for the high costs of unreasonable employee turnover.

Now is a good time to drop the consultant speak and potentially negative phrases like human capital.  Mr. Picoult is a consultant that I agree with.

© 2010 John Gregory Self

 

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If It Sounds Too Good To Be True...

Consolidation may not be the right move for all hospitals.  

Healthcare reform, with its myriad of unknowns, may drive independent community hospitals to consider a merger or some variation of a strategic alliance that would shift local control -- ownership -- to a larger health system.  

The Accountable Care Organization (ACO) concept will undoubtedly spur some of this rush to affiliation -- a sale or change of ownership control -- because some hospitals will question whether they have the expertise or financial resources to manage reimbursement risks.  They reason that a health system with deeper pockets and a broader range of expertise is the prudent course of action to deal with what many believe will be complex implementation options under the ACO model. Then there are CEOs who have heard about ACOs and want one just because.... as this video so aptly explains.

My suggestion to these hospitals: stop.  Take a breath.  At this point there are very few experts with any real ACO experience.   Even consulting firms that stand to make an enormous amount of money selling ACO knowledge and insight to client hospitals are being unusually circumspect. Everyone is waiting for the rules to be written and then explained.

Now here is the real irony.  Healthcare reform is partially about reducing costs.  Sure there will be improved access and payment reform, but at this point, there is very little in the reform legislation that focuses on costs and quality.  When mergers are announced, usually with grand fanfare, the explanation for the transaction almost always centers around the belief that the merger or strategic affiliation -- a sale by any other name -- will produce synergies that will improve access, enhance quality and reduce costs.  The truth is that mergers almost always fail to produce on any of their grand promises.  In fact, there is a large body of evidence that healthcare mergers are extremely difficult to pull off and most result in unhappy marriages, not the hoped-for improved clinical quality and cost-saving juggernaut that was promised.  That is the norm.

Of course there are some good examples to the contrary.  East Texas Medical Center Regional Healthcare System now owns or leases more than 12 smaller community hospitals throughout northeast Texas.  Their approach incorporates investment to improve the local primary care hospital in hopes of keeping their residents close to home for the vast majority of all their care.  In addition to capital investment, ETMC has helped communities recruit physicians.  Almost all of what they do is to support their regional mission -- keeping their patients close to their homes, family and friends.   There are other successful consolidations and systems like ETMC, who have crafted relationships that are mutually beneficial. But so many do not work out so well. 

At the end of the day, CEOs in community hospitals are facing some daunting challenges.  This has always been one of the toughest most underpaid jobs around, a great deal more complex than most businesses of similar size.  While I may have 30 years of executive experience and a point of view that is built around my experiences,  I am not about to second-guess a CEO who is trying to do the right thing for his or her hospital and their community.  I just want to offer a word of caution:  Do not depend  on your merger partner or their advisors to help guide you to do the right thing.  As my grandmother once said, "If it sounds too good to be true, it might just well be."

 © 2010 John Gregory Self

 

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.

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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

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A Simple Answer for Silo Management

Management Silos are a regrettable fixture in far too many companies.  They are particularly egregious in health care where these ego-based fiefdoms drive up costs, frustrate employees and harm patients.

That far too many CEOs are reluctant to tear down these barriers is a sad reflection of how institutionalized these artificial divisions can be. What is depressing is that these silos are more about executive arrogance and ego, not improved efficiency, value innovation, or customer service and satisfaction.

There are two types of management silos.

1. The elephant in the living room variety.  Everyone can see it and smell it, even if they are reluctant to talk about it for fear of attracting attention and retribution by the guilty executives who control the silos.

2.  Passive/aggressive model.  This type of silo management is actually more dangerous for the organization because it is easier to ignore. The turf barriers are disguised until a well-meaning employee tries to make a change.  That is very common in healthcare organizations and that may be good reason why so many hospitals talk about improving quality of care and safety and far too few actually achieve meaningful results.  You cannot achieve improvements in quality and safety when executives are more interested in hoarding influence (read: silo control) than the common good of the organization and its customers.

Management silos are the structural equivalent of  the "shareholder first" business strategy, one of the dumbest ideas ever created, Jack Welch once said.  The MBA oath strikes a blow against placing the needs or greed of shareholders and corporate executives who make decisions solely on short-term factors that will drive the stock price against well being of customers, employees and the communities they serve.  If executives stay focused on those priorities, the argument goes, the shareholders will be well taken care of.

In healthcare, we need to tear down the walls, empower our employees and focus on the needs of our patients.  Early in my healthcare career, when I was flying around the country selling and implementing hospital-based helicopter ambulance programs, a wise old hospital CEO explained that if you take care of the needs of the patients and their physicians, you will be very successful.  "Ego and arrogance do not have a role in the show," he said.

That is a blinding flash of the obvious. However, for many leaders that answer must be wrong because it is just too simplistic.  Hospitals are among the most complex business organizations ever devised, Peter Drucker said. Truer words were never spoken.  But the complexity of the organization is not made less complex by silos.  It is only made worse.

Perhaps the simple answer is the right answer.

(c) 2010 John Gregory Self

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The Consolidation Myth: Being Nimble Matters

"If your hospital is attractive financially, has a good payer mix, makes a margin, and dominates its local area, it's a fat target for larger systems that see growth and scale as the way to thrive under healthcare reform."   -- HealthLeaders.Com

In anticipation of ongoing reductions in reimbursement and additional legislative attempts to change the way healthcare services are delivered, the consolidation of community hospitals into larger  regional healthcare systems is frequently touted as an answer to controlling costs, having access to capital, and improving quality.  

The problem with the consolidation scenario is that it rarely, if ever, results in reduced costs and bigger does not guarantee improvements in quality, safety or service.  The only possible advantage, assuming the independent hospital has done a good job in managing its operations, is improved access to capital, but that too can be misleading.  Well run, financially stable hospitals with solid balance sheets can get capital.  

Consolidation often occurs because the local leadership team and board have not done  a great job managing their operations and, over time, positioned their hospital in such a hole that selling out is the only answer. However, the days in which regional systems will step in and invest in a sinking community hospital are nearing an end. 

The regional systems are eying new sources of revenue, not dogs with fleas.

Consolidation eliminates competition.  The lack of competition allows prices to rise, which is exactly what has happened in metro market after metro market, when consolidation occurred (competitors were eliminated).

No one knows for sure what the future holds for healthcare reform, but I believe that we will see significant structural change along with the inevitable reductions in reimbursement. In this scenario, who has the best chance of surviving?  The large system with substantial overhead and the inability to change on a dime?  I don't think so.

I am putting my money on the well-managed smaller, nimble providers that can anticipate change and quickly respond. 

Running a big health system, one CEO confessed, is like managing an aircraft carrier with a fleet of support ships and systems to keep it on course and safe.  

In tough economic times with a threatening regulatory environment, think of that large health system as an aircraft carrier in the narrow Houston Ship Channel, trying to turn around.

(c)John Gregory Self

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