Category Archives: Board Engagement

The Emotional IQ of Leadership

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https://www.kaufmanhall.com/insights/thoughts-ken-kaufman/emotional-iq-healthcare-leadership?utm_source=mkto&utm_campaign=ken-weekly-blog&utm_medium=em&utm_term=240110&mkt_tok=NjU0LUNOWS0yMjQAAAGQktz3EE-Icwp4lCmbbyhi-Nv9eBv6evN_iorx5bE-GNn6I5EYM8gZppQEmCeunBoe2kXyngKHhT_aYdOUDowg6v21S3P0_MIadT4rgMCWDDtD

I recently had dinner with my good friend and colleague, Dave Blom. For many years, Dave was the President and CEO of Ohio Health. During his tenure, Ohio Health was one of America’s most successful health systems by any measure. Dave Blom was known nationally as a calm, steady, and thoughtful hospital leader.

Dave and I were talking about the difficulties of leading and managing complex healthcare organizations in the post-Covid era. The hospital problems of finance, staffing, access, and inflation have been well itemized and documented. While the day-to-day operating problems are undeniably significant and persistent, Dave and I agreed that the hospital leadership issues that really matter right now center around the ability of hospital executives to possess and demonstrate an authentic emotional IQ to lead a diverse workforce in such difficult circumstances.

Such a realization is supported by the recognition that no matter how technically excellent they are, hospitals are just not like other organizations in other industries. Taking care of patients—in fact, taking care of communities—is not only managerially complicated but emotionally testing. Leadership gets much more complicated in the current environment.

Having moved the conversation to this point Dave and I then took on the definition of a workable and effective leadership emotional IQ. That emotional IQ is characterized by the following:

  1. Empathy. During Covid, when leadership was challenged at every level and at every American organization, the value of personal empathy moved to the forefront. Empathy is defined as “the ability to understand and share the feelings of another.” More directly, a hospital CEO needs to understand and share the feelings of his or her entire organization. Great hospital leaders understand the difference between sympathy and empathy. Sympathy is a passive emotion, an emotion that notes and cares about a problem but doesn’t necessarily act on that problem. Empathy is an active emotion. A leader with empathy not only notes the problem but immediately moves to be of help either at the personal or organizational level, whichever is required.
  2. Vulnerability. Vulnerability is defined as “the willingness to show emotion or to allow one’s weakness to be seen or known.” Historically, executive leadership—especially in corporate situations—has been trained and encouraged not to show emotion or weakness. But organizations are changing, and the composition of the hospital workforce is different. The patient care process is emotional in and of itself and the daily operational interaction demands a different kind of leadership—a leadership that is comfortable with both emotion and weakness.
  3. Humility. Executives who show humility “are willing to ask for help and don’t insist on everything done their way; they are quick to forgive and are known for their patience.” Humility also reflects changing organizational ecosystems. Humility is not generally indicative or compatible with the “military command” model of leadership. It is more supportive of a collaborative and cooperative leadership model, which has at its core a heavy dose of decentralization and delegation.

As our dinner was coming to a close, we took note of two other leadership observations.

First, when you create a leadership team that fully embraces the principles of empathy, vulnerability, and humility, then that emotional IQ combination creates the highest order goal of organizational trust. All of this is exceptionally meaningful since organizational trust is more important than ever, given that it is in such short supply at all levels of American society. Dave Blom then advanced the discussion to one further point. When you gain the full value of empathy, vulnerability, and humility and you add to that the organizational trust you have established, all the principled prerequisites for establishing corporate and managerial integrity are in place. Empathy plus vulnerability plus humility equals organizational trust. And then empathy plus vulnerability plus humility plus trust equals organizational integrity.

The emotional IQ of leadership is not created by accident. It requires a hyper-aware organization at both the management and Board level. It requires governance and executive leaders who understand that hospital success cannot be achieved by technical and clinical excellence alone. That success must be built on a platform of an emotional IQ that is supported, valued, and shared by the entire hospital community.

An Open Letter to Hospital Boards of Directors: Long-Term Strategic Planning needs Your Attention

Posted on by • Posted in Board, Board Chairman, Board Competency, Board Engagement, Board Purpose, Board Weakness, Board Workload, Leadership, Leadership Implementation, Leadership Transformation, Leadership Vision, Strategic Leadership, Strategic Plan, Strategy and Transformation, Strategy Sustainable Long Term • Leave a comment
An Open Letter to Hospital Boards of Directors: Long-Term Strategic Planning needs Your Attention

As 2023 comes to an end and prognostics for 2024 pepper Inboxes, high anxiety is understandable. The near-term environment for hospitals, especially public hospitals and not-for-profit health systems, is tepid at best: despite the November uptick in operating margins to 2% (Fitch, Syntellis), the future for hospitals is uncertain and it’s due to more than payer reimbursement, labor costs and regulatory changes.

Putting lipstick on the pig serves no useful purpose:

though state hospital associations, AHA, FAH, AEH and others have been effective in fending off unwelcome threats ranging from 340B cuts, site neutral payments and others at least temporarily, the welcoming environment for hospitals in the throes of the pandemic has been replaced by animosity and distrust.

The majority of the population believes U.S. the health system is heading in the wrong direction and think hospitals are complicit (See Polling data from Gallup and Keckley Poll below). They believe the system puts its profit above patient care and welcome greater transparency about prices and business practices. In states like Colorado (hospital expenditure report), Minnesota (billing and collection), and Oregon (nurse staffing levels), new regulations feed the public’s appetite for hospital accountability alongside bipartisan Congressional efforts to limit tax exemptions and funding for hospitals.

It’s a tsunami hospital boards must address if they are to carry out their fiduciary responsibilities:

  • Set Direction: The organization’s long-term strategy in the context of its vision, mission and values.
  • Secure Capital: The amount and sourcing of capital necessary to execute the strategy.
  • Hire a Competent CEO and Give Direction: Boards set direction; CEOs execute.

Regretfully, near-term pressures on hospitals have compromised long-term strategic planning in which the Board play’s the central role. But most hospital boards lack adequate preparedness to independently assess the long-term future for their organization i.e. analysis of trends and assumptions that cumulatively reshape markets, define opportunities and frame possible destinations for hospitals drawn from 5 zones of surveillance:

  • Clinical innovations.
  • Technology capabilities.
  • Capital Market Access and Deployment.
  • Regulatory Policy Changes.
  • Consumer Values, Preferences and Actions.

In reality, the near-term issues i.e. labor and supply chain costs, insurer reimbursement, workforce burnout et al—dominate board meetings; long-range strategic planning is relegated to an annual retreat where the management team and often a consultant present a recommendation for approval. But in many organizations, the long-term strategic plans (LTSPs) fall short:

  • Most LTSPs offer an incomplete assessment of clinical innovations and technologies that fundamentally alter how health services will be provided, where and by whom.
  • Most LTSPs are based on an acute-centric view of “the future” and lack input about other sectors and industries where the healthcare market is relevant and alternative approaches are executed.
  • Most LTSPs are aspirational and short on pragmatism. Risks are underestimated and strengths over-estimated.
  • Most LTSPs are designed to affirm the preferences of the hospital CEO without the benefit of independent, studied review and discussion with the board.
  • Most LTSPs don’t consider all relevant ‘future state’ options despite the Board’s fiduciary obligation to assure they do.
  • Most rely on data that’s inadequate/incomplete/misleading, especially in assessing how and chare capital markets are accessing and deploying capital in healthcare services.
  • Most LTSPs are not used as milestones for monitoring performance nor are underlying assumptions upon which LRSPs are based revisited.

My take:

The Board’s role in Long-Range Strategic Planning is, in many ways, it’s most important. It is the basis for deciding the capital requirements necessary to its implementation and the basis for hiring, keeping and compensating the CEO. But in most hospitals, the board’s desire to engage more directly around long-term strategy for the organization is not addressed. Understandable…

  • Boards are getting more media attention these days, and it’s usually in an unflattering context. Disclosures of Board malperformance in high profile healthcare organizations like Theranos, Purdue and others has been notable. Protocols for responding among Board members in investor-owned organizations is a priority, but less-so in many not-for-profit settings including hospitals often caught by surprise by media.
  • And Board members are asking for their organizations to engage them in more in strategy development. In the latest National Association of Corporate Directors’ survey, 81% of directors cited “oversight of strategic execution” and 80% “oversight of strategy development” as their top concerns from a list of 13 options. Hospital boards are no exception: they want to be engaged and cringe when treated as rubber stamps.

Hospital boards intuitively understand that surviving/thriving in 2024 is important but no guarantee of long-term stability given sobering realities with long-term impact:

  • The core business of hospitals–inpatient, outpatient and emergency services—is subject to market constraints on its prices, consumer and employer expectations and non-traditional competition. Bricks, sticks and clicks strategies will be deployed in a regulatory environment that’s agnostic to an organization’s tax status and competition is based on value that’s measured and publicly comparable.
  • The usefulness of artificial intelligence will widen in healthcare services displacing traditional operating models, staffing and resource allocation priorities.
  • Big tech (Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), Meta (META), Tesla (TSLA) and Nvidia (NVDA)—collectively almost 60% of all S&P 500 gains in 2023—will play a direct and significant role in how the healthcare services industry responds to macro-opportunities and near-term pressures. They’re not outside looking in; they’re inside looking out.
  • Private capital will play a bigger role in the future of the system and in capitalizing hospital services. Expanded scale and wider scope will be enabled through partnerships with private capital and strategic partners requiring governance and leadership adaptation. And, the near-term hurdles facing PE—despite success in fund-raising—will redirect their bets in health services and expectations for profits.
  • State and federal regulatory policies and compliance risks will be more important to execution. Growth through consolidation will face bigger hurdles, transparency requirements in all aspects of operations will increase and business-as-usual discontinued.
  • The scale, scope and effectiveness of an organization’s primary and preventive health services will be foundational to competing: managing ‘covered lives’, reducing demand, integrating social determinants and behavioral health, enabling consumer self-care, leveraging AI and enabling affordability will be key platform ingredients that enable growth and sustainability.
  • Media attention to hospital business practices including the role Boards play in LRSPs will intensify.

Granted: the issues facing hospitals are reliably short-term: as Congress returns next week, for instance, funding for the FDA, Community Health Center Fund, Teaching Health Center Graduate Medical Education Program, National Health Services Corps and Veterans Health is not authorized and $16 billion in cuts to Medicaid disproportionate share payments remains unsettled, so the short-term matters.

But arguably, engaging the hospital board in longer term planning is equally important. It’s not a luxury.

Happy New Year. Buckle up!

Burnout climbs its way to boards

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https://www.beckershospitalreview.com/hospital-management-administration/burnout-climbs-its-way-to-boards.html?origin=PayerE&utm_source=PayerE&utm_medium=email&utm_content=newsletter&oly_enc_id=2893H2397267F7G

Board members are a professional group less often linked to the chronic exhaustion and emotional fatigue of burnout. But governing bodies are now increasingly feeling the strain, Fortune reports. 

Board members are noting longer meetings, more rigorous prep work, and more frequent calls between meetings, according to Fortune, which spoke with a Korn Ferry partner who is hearing talk of board-level exhaustion “everywhere.” 

One contributing factor to boards’ burnout is C-level turnover. As CEOs and C-suite leaders exit organizations, boards are forced to step up and take on a wider range of issues, Fortune reports. In healthcare, CEO changes have ticked upward. U.S. hospitals saw 126 CEO exits through the first 10 months of the year, a 62 percent increase from the same time period in 2022. 

Increased rigor that board members now face in their responsibilities could also signal a change is due in how professionals think about board service. 

The founder and CEO of a membership organization for executive women told Fortune that the traditional model of boards being a “last hurrah” before an executive’s retirement is not fit for the current demands and changes, such as the addition of more board members or limiting the number of board seats that someone can hold, may be needed.

Experts told Fortune that board leaders ought to check in with individual members to clarify the workload of serving on the body and acknowledge how the job has changed. This may be particularly crucial in healthcare, where fewer than 15% of board members overseeing the nation’s top hospitals have a professional background in the industry. 

Before the growing issue of burnout, boards have long grappled with passive and disengaged members. Here are 10 signs of a board member who is effectively governing and adding value. 

10 signs your board has a strong pulse

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https://www.beckershospitalreview.com/hospital-management-administration/10-signs-your-board-has-a-strong-pulse.html

Great systems are usually governed by great boards, who are made up of people who match the following 10 descriptions. 

Great board members do more than comply with corporate governance structure and rules. Too often, board members have loose ties to one another, are passive to the wants and views of the CEO or are not as informed about the specifics of healthcare as they ought to be. We view all of these traits, and more, as signs that a board has lost its charge and is no longer effectively governing.

We consider the following 10 items as descriptors of a board member who has a strong pulse and adds value to a governing body. 

1. The board member is active, engaged and passionate about being a board member. No board can afford to have disengaged members. Bylaws and attendance requirements are important, but simply complying with them does not necessarily equate to being an active, contributing and passionate trustee. Engaged board members show up to meetings, and they show up prepared. While members typically refrain from meddling in day-to-day operations, boards with high levels of trust and candor make a point to communicate with the CEO outside of scheduled board meetings. Quality of board engagement is an important contributing factor to board performance, and there is a correlation between board engagement and the ability to attract board members. Everything that follows is dependent on board engagement. 

2. The board member has a point of view on what the organization must be great at, and the board member is vehement about it. Health systems cannot be all things to all people, although the opportunities to attempt this are ample. The best organizations are not static, but disciplined. Well-governed systems know the specialties they are great in, and they continue to double down on their strengths. Their boards are cognizant of where revenues come from and ensure resources are allocated accordingly.

3. The board member realizes that her top job is to ensure the system has great leadership in place. Leaders can fall short in all sorts of ways, some more visible and easily detectable than others. The active, engaged and vehement board does not easily accept disappointment. Boards have many steps at their disposal to manage a problem before firing a CEO or senior leader, but they should never function in a way where termination is unthinkable. Boards cause great damage when they tolerate mediocre performance or compromised values among people at the top of the organization. 

4. The board member understands accountability for patient safety and quality of care rests firmly in the boardroom. It rests on board members to insist that they receive sufficient, timely information about patient safety and care quality from the CEO. It rests on board leadership to ensure members have access to expertise and resources to properly obtain, process and interpret this information. It is not a bad idea for quality expertise to be included in board members’ competency profiles and for boards to undergo training and continued education in quality and safety. This is especially relevant for board members who come from industries outside of healthcare. It rests on the board when care quality declines or when lapses in patient safety are unaddressed: It is unacceptable for a board to say it missed the memo on care outcomes or that it did not understand the information in front of it. 

5. The board member is a watchdog on societal, governance and audit issues. Informed citizens make for strong board members. It is important to not only be plugged in and aware of the issues and challenges confronting the organization today, but to be aware of broader societal issues that could affect system strategy and performance tomorrow. This is not hypothetical thinking. The past year was a master class in how broader issues affected healthcare in acute and direct ways: systemic racism, a global supply chain and a churning labor market are just three. Good boards are made up of members who stay informed and are biased toward anticipatory thinking, in which they are eager to explore the ways in which issues larger than or outside of their industry may come to affect the organization they help govern. 

6. The board member supports the leadership team, but also questions it and holds it accountable. Board members cannot be pushovers for leadership. Directors are nominated by existing board directors on the nominating committee, which often includes the CEO. As a result, trustees can empathize with the CEO of the organization on whose board they sit. Empathy does not equate to blind acceptance, but this is nonetheless a dynamic trustees should be aware of and work to keep in check. It is not unusual for board members to struggle when giving candid feedback to the CEO, for example. As a result, chief executives carry on and live in a bigger and bigger bubble. 

It’s worth noting that the reverse can occur within boardrooms as well, in which board members disagree about strategy and seek a CEO they can easily influence. At the end of the day, being a pushover is not associated with strong leadership and should be avoided by both trustees and senior executives. Instead, trustees need to embrace constructive tension in the boardroom. Questions, challenges and disagreements that reach resolution can drive valuable dialogue and stronger outcomes.

7. The board member allows others to voice their thoughts. In many boardrooms, a small number of the participants do most of the talking while the majority stays relatively quiet. A powerful or well-connected member may dominate discussions. Ideally, boards embrace the middle in interpersonal communication, with trustees contributing not too much nor too little. Either goes against the board’s very reason for being. 

8. The board member helps ensure the board as a whole reflects the racial, ethnic, gender, religious and socioeconomic diversity of the community served by the organization. This is important for a number of reasons, with health equity being principal. Trustees are stewards for the communities they serve. For hospitals and health systems to increase opportunities for everyone to be healthier — including those who face the greatest obstacles — they need visions, strategies and goals that begin at the top from individuals who have viewpoints from the community. Without these insights, the board simply can’t govern effectively. Additionally, research has consistently found that teams of people who have diversity in knowledge and perspectives — as well as in age, gender and race — can be more creative and better avoid groupthink.

9. The board member is accessible. Just as no board wants its CEO in a bubble, governing bodies must actively resist this risk. For a stretch of time, boards were less visible groups of people who would meet four to six times a year in a mahogany-paneled room to decide the future of an organization that employs tens of thousands and serves even more. This dynamic cannot hold in healthcare. Community members and employees should know — or be able to easily learn — who serves on their health system’s board. If stakeholders bring issues or concerns to a board member, the trustee should be prepared to respond and follow up. In 2021’s healthcare, board members cannot breathe rarified air.

10. The board member emulates the values of the health system. So often when people talk about the tone being set at the top, they have the CEO in mind. The board is just as responsible, if not more responsible, for this charge. What a board permits, it promotes. Board members that emulate system values are better positioned to collaborate with mutual respect, candor and trust. Board members whose values are mismatched or personal agendas are at cross-purposes with the good of the organization should be replaced. 

The Four Issues that will Impact Healthcare Services Providers and Insurers Most in the Last Half of 2023 and First Half of 2024

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The Four Issues that will Impact Healthcare Services Providers and Insurers Most in the Last Half of 2023 and First Half of 2024

As first half 2023 financial results are reported and many prepare for a busy last half, strategic planning for healthcare services providers and insurers point to 4 issues requiring attention in every boardroom and C suite:

Private equity maturity wall: 

The last half of 2023 (and into 2024) is a buyer’s market for global PE investments in healthcare services: 40% of PE investments in hospitals, medical groups and insurtech will hit their maturity wall in the next 12 months. Valuations of companies in these portfolios are below their targeted range; limited partner’ investing in PE funds is down 28% from pre-pandemic peak while fund raising by large, publicly traded, global funds dominate fund raising lifting PE dry powder to a record $3.7 trillion going into the last half of 2023.

In the U.S. healthcare services market, conditions favor well-capitalized big players—global private equity funds and large cap aggregators (i.e., Optum, CVS, Goldman Sachs, Blackstone et al) who have $1 trillion to invest in deals that enhance their platforms. Deals done via special purpose acquisition corporations (SPACS) and smaller PE funds in physicians, hospitals, ambulatory services and others are especially vulnerable. (see Bain and Pitchbook citations below). Addressing the growing role of large-cap PE and strategic investors as partners, collaborators, competitors or disruptors is table stakes for most organizations recognizing they have the wind at their backs.

Consolidation muscle by DOJ and FTC: 

Healthcare is in the crosshair of the FTC and DOJ, especially hospitals and health insurers.  Hospital markets have become increasingly concentrated: only 12% of the 306 Hospital Referral Regions is considered unconcentrated vs. 23% in 2008. In the 384 insurance markets, 23% are unconcentrated, down from 35% in 2020. Wages for healthcare workers are lower, prices for consumers are higher and choices fewer in concentrated markets prompting stricter guidelines announced last week by the oversight agencies. Big hospitals and big insurers are vulnerable to intensified scrutiny. (See Regulatory Action section below).

Defamatory attacks on nonprofit health systems: 

In the past 3 years, private, not-for-profit multi-hospital systems have been targeted for excess profits, inadequate charity care and executive compensation.  Labor unions (i.e., SEIU) and privately funded foundations (i.e., West, Arnold Venture, Lown Institute) have joined national health insurers in claims that NFP systems are price gaugers undeserving of the federal, state and local tax exemptions they enjoy. It comes at a time when faith in the U.S. health system is at a modern-day low (Gallup), healthcare access and affordability concerns among consumers are growing and hospital price transparency still lagging (36% are fully compliant with the 2021 Executive Order).

Notably, over the last 20 years, NFP hospitals have become less dominant as a share of all hospitals (61% in 2002 vs. 58% last year) while investor-owned hospitals have shown dramatic growth (from 15% in 2002 to 24% last year). Thus, the majority of local NFP hospitals have joined systems creating prominent brands and market dominance in most regions. But polling indicates many of these brands is more closely associated with “big business” than “not-for-profit health” so they’re soft targets for critics. It is likely unflattering attention to large, NFP systems will increase in the next 12 months prompting state and federal regulatory actions and erosion of public support.  (See New England Journal citation in Quotables below)

Campaign 2024 healthcare rhetoric: 

Republican candidates will claim healthcare is not affordable and blame Democrats. Democrats will counter that the Affordable Care Act’s expanded coverage and the Biden administration’s attack on drug prices (vis a vis the Inflation Reduction Act) illustrate their active attention to healthcare in contrast to the GOP’s less specific posturing.

Campaigns in both parties will call for increased regulation of hospitals, prescription drug manufacturers, health insurers and PBMs. All will cast the health industry as a cesspool for greed and corruption, decry its performance on equitable access, affordability, price transparency and improvements in the public’s health and herald its frontline workers (nurses, physicians et al) as innocent victims of a system run amuck.

To date, 16 candidates (12 R, 3 D, 1 I) have announced they’re candidates for the White House while campaigns for state and local office are also ramping up in 46 states where local, state and national elections are synced. Healthcare will figure prominently in all. In campaign season, healthcare is especially vulnerable to misinformation and hyper-attention to its bad actors. Until November 5, 2024, that’s reality.

My take:

These issues frame the near-term context for strategic planning in every sector of U.S. healthcare. They do not define the long-term destination of the system nor roles key sectors and organizations will play. That’s unknown.

  • What’s known for sure is that AI will modify up to 70% of the tasks in health delivery and financing and disrupt its workforce.
  • Black Swans like the pandemic will prompt attention to gaps in service delivery and inequities in access.
  • People will be sick, injured, die and be born.
  • And the economics of healthcare will force uncomfortable discussions about its value and performance.

In the U.S. system, attention to regulatory issues is a necessary investment by organizations in every state and at the federal level. Details about these efforts is readily accessible on websites for each organization’s trade group. They’re the rule changes, laws and administrative actions to which all are attentive. They’re today’s issues.

Less attention is given the long-term. That focus is often more academic than practical—much the same as Robert Oppenheimer’s early musings about the future of nuclear fusion. But the Manhattan Project produced two bombs (Little Boy and Fat Man) that detonated above the Japanese cities of Hiroshima and Nagasaki in 1945, triggering the end of World War II.

The four issues above should be treated as near and present dangers to the U.S. health system requiring attention in every organization. But responses to these do not define the future of the U.S. system. That’s the Manhattan Project that’s urgently needed in our system.

Navigating a Post-Covid Path to the New Normal with Gist Healthcare CEO, Chas Roades

Posted on by • Posted in Affordability, Board, Board Assessment, Board Competency, Board Engagement, Brand Loyalty, Branding, Business to Consumer Model, Capitation, Cash, Cash Reserves, Competition, Consumer Loyalty, Consumer Trust, Consumerism, Coronavirus, Corporate Overhead, Corporate Strategy, Cost Management, Cost Reduction, Crisis, Crisis Management, Cross Subsidy Model, Debt Service, Decision Making, Demographics, Disruption, Disruptive Technology, Economic Crisis, Economic Stimulus, Efficiency, Elective Procedures, Elective Surgery, Fee for Service Reimbursement, Financial Incentives, Financial Viability, Financially Distressed, Focus, Governance, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health System, High Deductible Health Plans, High Drug Prices, High Prices, Hospital, Hospital Industry, Job, Job Market, Job Search, Job Security, KPI Dashboards, Labor Spend Management, Leadership, Leadership Alignment, Leadership Trust, Market Consolidation, Market Power, Market Share, Market Trends, Market Uncertainty, Medical Group, Member Health, Mergers & Acquisitions, Net Income, Nonoperating Income, Objectivity, Operating Expense Reduction, Operating Expenses, Operating Income, Operating Margin, Operating Performance, Operating Revenue, Out of Pocket Expenses, Pandemic, Physician, Physician Employment, Physician Independent Network (IPA), Physician Multispecialty Network, Physician Practice Management, Price Transparency, Pricing, Primary Care Delivery Model, Primary Care Loyalty, Private Equity, Profit Model, Quality, Quality of Care, Safety, Strategic Alignment, Strategic Leadership, Strategy, Streamlining Operations, Supply Chain, Surprise Bills, Telemedicine, Trust, Trusted Brand, Truth, Value, Value Creation, Value Proposition, Value-Based Healthcare, Virtual Healthcare, Virtual Reality, Virtual Visit, Workplace Safety • Leave a comment

https://www.lrvhealth.com/podcast/?single_podcast=2203

Covid-19, Regulatory Changes and Election Implications: An Inside ...Chas Roades (@ChasRoades) | Twitter

Healthcare is Hard: A Podcast for Insiders; June 11, 2020

Over the course of nearly 20 years as Chief Research Officer at The Advisory Board Company, Chas Roades became a trusted advisor for CEOs, leadership teams and boards of directors at health systems across the country. When The Advisory Board was acquired by Optum in 2017, Chas left the company with Chief Medical Officer, Lisa Bielamowicz. Together they founded Gist Healthcare, where they play a similar role, but take an even deeper and more focused look at the issues health systems are facing.

As Chas explains, Gist Healthcare has members from Allentown, Pennsylvania to Beverly Hills, California and everywhere in between. Most of the organizations Gist works with are regional health systems in the $2 to $5 billion range, where Chas and his colleagues become adjunct members of the executive team and board. In this role, Chas is typically hopscotching the country for in-person meetings and strategy sessions, but Covid-19 has brought many changes.

“Almost overnight, Chas went from in-depth sessions about long-term five-year strategy, to discussions about how health systems will make it through the next six weeks and after that, adapt to the new normal. He spoke to Keith Figlioli about many of the issues impacting these discussions including:

  • Corporate Governance. The decisions health systems will be forced to make over the next two to five years are staggeringly big, according to Chas. As a result, Gist is spending a lot of time thinking about governance right now and how to help health systems supercharge governance processes to lay a foundation for the making these difficult choices.
  • Health Systems Acting Like Systems. As health systems struggle to maintain revenue and margins, they’ll be forced to streamline operations in a way that finally takes advantage of system value. As providers consolidated in recent years, they successfully met the goal of gaining size and negotiating leverage, but paid much less attention to the harder part – controlling cost and creating value. That’s about to change. It will be a lasting impact of Covid-19, and an opportunity for innovators.
  • The Telehealth Land Grab. Providers have quickly ramped-up telehealth services as a necessity to survive during lockdowns. But as telehealth plays a larger role in the new standard of care, payers will not sit idly by and are preparing to double-down on their own virtual care capabilities. They’re looking to take over the virtual space and own the digital front door in an effort to gain coveted customer loyalty. Chas talks about how it would be foolish for providers to expect that payers will continue reimburse at high rates or at parity for physical visits.
  • The Battleground Over Physicians. This is the other area to watch as payers and providers clash over the hearts and minds of consumers. The years-long trend of physician practices being acquired and rolled-up into larger organizations will significantly accelerate due to Covid-19. The financial pain the pandemic has caused will force some practices out of business and many others looking for an exit. And as health systems deal with their own financial hardships, payers with deep pockets are the more likely suitor.”

 

 

 

 

The new CFO mandate: Prioritize, transform, repeat

Posted on by • Posted in Board Engagement, Capability Building, Cash-Flow Improvements, Change Agent, Changing Responsibilities, Chief Financial Officer (CFO), Corporate Strategy, Data Analytics, Data Integrity, Digitization, Internal Audit, Key Performance Indicators, Performance Baseline, Performance Management, Pricing, Risk Management, Talent Management, Transformation Strategy, Unchanged Persceptions • Leave a comment

https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-new-cfo-mandate-prioritize-transform-repeat

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Amid a raft of new duties for CFOs, our survey suggests that finance leaders are well positioned to lead the C-suite agenda by championing transformations, digitization, and capability building.
If you wanted to validate the old adage that the only constant in life is change, the results from our newest McKinsey Global Survey suggest you need not look any further than the CFO role.1 In the two years since our previous survey on the topic, CFOs say the number of functions reporting to them has risen from about four to more than six. What’s more, the share of CFOs saying they oversee their companies’ digital activities has doubled during that time. And many finance leaders say they are being asked to resolve issues in areas that are relatively new to them while continuing to mind traditional responsibilities, such as risk management, that remain business priorities.

Responses indicate that the opportunity for CFOs to establish the finance function as both a leading change agent and a source of competitive advantage has never been greater. Yet they also show a clear perception gap that must be bridged if CFOs are to break down silos and foster the collaboration necessary to succeed in a broader role. While CFOs believe they are beginning to create financial value through nontraditional tasks, they also say that a plurality of their time is still devoted to traditional tasks versus newer initiatives. Meanwhile, leaders outside the finance function believe their CFOs are still primarily focused on and create the most value through traditional finance tasks.

How can CFOs parlay their increasing responsibility and traditional finance expertise to resolve these differing points of view and lead substantive change for their companies? The survey results point to three ways that CFOs are uniquely positioned to do so: actively heading up transformations, leading the charge toward digitization, and building the talent and capabilities required to sustain complex transformations within and outside the finance function.

Changing responsibilities, unchanged perceptions

The latest survey results confirm that the CFO’s role is broader and more complex than it was even two years ago. The number of functional areas reporting to CFOs has increased from 4.5 in 2016 to an average of 6.2 today. The most notable increases since the previous survey are changes in the CFO’s responsibilities for board engagement and for digitization (that is, the enablement of business-process automation, cloud computing, data visualization, and advanced analytics). The share of CFOs saying they are responsible for board-engagement activities has increased from 24 percent in 2016 to 42 percent today; for digital activities, the share has doubled.

The most commonly cited activity that reports to the CFO this year is risk management, as it was in 2016. In addition, more than half of respondents say their companies’ CFOs oversee internal-audit processes and corporate strategy. Yet CFOs report that they have spent most of their time—about 60 percent of it, in the past year—on traditional and specialty finance roles, which was also true in the 2016 survey.

Also unchanged are the diverging views, between CFOs and their peers, about where finance leaders create the most value for their companies. Four in ten CFOs say that in the past year, they have created the most value through strategic leadership and performance management—for example, setting incentives linked to the company’s strategy. By contrast, all other respondents tend to believe their CFOs have created the most value by spending time on traditional finance activities (for example, accounting and controlling) and on cost and productivity management across the organization.

Finance leaders also disagree with nonfinance respondents about the CFO’s involvement in strategy decisions. CFOs are more likely than their peers to say they have been involved in a range of strategy-related activities—for instance, setting overall corporate strategy, pricing a company’s products and services, or collaborating with others to devise strategies for digitization, analytics, and talent-management initiatives.

Guiding and sustaining change

Our latest survey, along with previous McKinsey research,2 confirms that large-scale organizational change is ubiquitous: 91 percent of respondents say their organizations have undergone at least one transformation in the past three years.3 The results also suggest that CFOs are already playing an active role in transformations. The CFO is the second-most-common leader, after the CEO, identified as initiating a transformation. Furthermore, 44 percent of CFO respondents say that the leaders of a transformation, whether it takes place within finance or across the organization, report directly to them—and more than half of all respondents say the CFO has been actively involved in developing transformation strategy.

Respondents agree that, during transformations, the CFO’s most common responsibilities are measuring the performance of change initiatives, overseeing margin and cash-flow improvements, and establishing key performance indicators and a performance baseline before the transformation begins. These are the same three activities that respondents identify as being the most valuable actions that CFOs could take in future transformations.

Beyond these three activities, though, respondents are split on the finance chief’s most critical responsibilities in a change effort. CFOs are more likely than peers to say they play a strategic role in transformations: nearly half say they are responsible for setting high-level goals, while only one-third of non-CFOs say their CFOs were involved in objective setting. Additionally, finance leaders are nearly twice as likely as others are to say that CFOs helped design a transformation’s road map.

Other results confirm that finance chiefs have substantial room to grow as change leaders—not only within the finance function but also across their companies. For instance, the responses indicate that half of the transformations initiated by CFOs in recent years were within the finance function, while fewer than one-quarter of respondents say their companies’ CFOs kicked off enterprise-wide transformations.

Leading the charge toward digitization and automation

The results indicate that digitization and strategy making are increasingly important responsibilities for the CFO and that most finance chiefs are involved in informing and guiding the development of corporate strategy. All of this suggests that CFOs are well positioned to lead the way—within their finance functions and even at the organization level—toward greater digitization and automation of processes.

Currently, though, few finance organizations are taking advantage of digitization and automation. Two-thirds of finance respondents say 25 percent or less of their functions’ work has been digitized or automated in the past year, and the adoption of technology tools is low overall.

The survey asked about four digital technologies for the finance function: advanced analytics for finance operations,5 advanced analytics for overall business operations,6 data visualization (used, for instance, to generate user-friendly dynamic dashboards and graphics tailored to internal customer needs), and automation and robotics (for example, to enable planning and budgeting platforms in cloud-based solutions). Yet only one-third of finance respondents say they are using advanced analytics for finance tasks, and just 14 percent report the use of robotics and artificial-intelligence tools, such as robotic process automation (RPA).7 This may be because of what respondents describe as considerable challenges of implementing new technologies. When asked about the biggest obstacles to digitizing or automating finance work, finance respondents most often cite a lack of understanding about where the opportunities are, followed by a lack of financial resources to implement changes and a need for a clear vision for using new technologies; only 3 percent say they face no challenges.

At the finance organizations that have digitized more than one-quarter of their work, respondents report notable gains from the effort. Of these respondents, 70 percent say their organizations have realized modest or substantial returns on investment—much higher than the 38 percent of their peers whose finance functions have digitized less than one-quarter of the work.

Unlocking the power of talent

The survey results also suggest that CFOs have important roles to play in their companies’ talent strategy and capability building. Since the previous survey, the share of respondents saying CFOs spend most of their time on finance capabilities (that is, building the finance talent pipeline and developing financial literacy throughout the organization) has doubled. Respondents are also much more likely than in 2016 to cite capability building as one of the CFO’s most value-adding activities.

Still, relative to their other responsibilities, talent and capabilities don’t rank especially high—and there are opportunities for CFOs to do much more at the company level. Just 16 percent of all respondents (and only 22 percent of CFOs themselves) describe their finance leaders’ role as developing top talent across the company, as opposed to developing talent within business units or helping with talent-related decision making. And only one-quarter of respondents say CFOs have been responsible for capability building during a recent transformation.

But among the highest-performing finance functions, the CFO has a much greater impact. Respondents who rate their finance organization as somewhat or very effective are nearly twice as likely as all others to say their CFOs develop top talent organization-wide (20 percent, compared with 11 percent). Among those reporting a very effective finance function, 38 percent say so.

Looking ahead

It’s clear from the numbers that CFOs face increased workloads and expectations, but they also face increased opportunities. In our experience, a focus on several core principles can help CFOs take advantage of these opportunities and strike the right balance:

  • Make a fundamental shift in how to spend time. To be more effective in their new, ever-expanding roles, CFOs must carefully consider where to spend their time and energy. They should explore new technologies, methodologies, and management approaches that can help them decide how and where to make necessary trade-offs. It’s not enough for them to become only marginally more effective in traditional areas of finance; they must ensure that the finance organization is contributing more and more to the company’s most value-adding activities. It’s especially important, therefore, that CFOs are proactive in looking for ways to enhance processes and operations rather than waiting for turnaround situations or for their IT or marketing colleagues to take the lead.
  • Embrace digital technologies. The results indicate that the CFO’s responsibilities for digital are quickly increasing. We also know from experience that finance organizations are increasingly becoming critical owners of company data—sometimes referred to as the “single source of truth” for their organizations—and, therefore, important enablers of organizational transformations. Finance leaders thus need to take better advantage and ownership of digital technology and the benefits it can bring to their functions and their overall organizations. But they cannot do so in a vacuum. Making even incremental improvements in efficiency using digital technologies (business intelligence and data-visualization tools, among many others) requires organizational will, a significant investment of time and resources, and collaboration with fellow business leaders. So, to start, CFOs should prioritize quick wins while developing long-term plans for how digitization can transform their organizations. They may need to prioritize value-adding activities explicitly and delegate or automate other tasks. But they should always actively promote the successes of the finance organization, with help from senior leadership.
  • Put talent front and center. Since the previous survey, CFOs have already begun to expand their roles and increase their value through capability building and talent development. But the share of CFOs who spend meaningful, valuable time on building capabilities remains small, and the opportunity for further impact is significant. Finance leaders can do more, for instance, by coaching nonfinance managers on finance topics to help foster a culture of transparency, self-sufficiency, and value creation.