Years ago, anthropologist Margaret Mead was asked by a student what she considered to be the first sign of civilization in a culture. The student expected Mead to talk about fishhooks or clay pots or grinding stones.
But no. Mead said that the first sign of civilization in an ancient culture was a femur (thighbone) that had been broken and then healed. Mead explained that in the animal kingdom, if you break your leg, you die. You cannot run from danger, get to the river for a drink or hunt for food. You are meat for prowling beasts. No animal survives a broken leg long enough for the bone to heal.
A broken femur that has healed is evidence that someone has taken time to stay with the one who fell, has bound up the wound, has carried the person to safety and has tended the person through recovery. Helping someone else through difficulty is where civilization starts, Mead said.”
We are at our best when we serve others. Be civilized.
– Ira Byock.
As we enter a new decade, everyone is searching for something to truly change the game in healthcare over the next 10 years. To find that answer, an estimated 50,000 people headed to San Francisco this week for the prestigious J.P. Morgan Healthcare Conference. Every one of them is placing big bets on who will win and lose in the future of healthcare. The shortcut to figuring this out is actually a question — or 10 questions to be more precise. And what matters most is whether or not the right people are asking and answering those questions.
While the prophets are ever present and ever ready to pitch their promises in every corner of the city, the pragmatists head up to the 32nd floor of the Westin St. Francis Hotel to hear from the CEOs and CFOs of close to 30 of the largest and most prestigious providers of care in the country. Why? Remember, this is an investor conference and if you want to understand any market, the first rule is to follow the money. And if you want to understand the future business model of healthcare, you better listen closely to the health providers in that room and take notes.
What providers are saying matters to everyone in healthcare
Healthcare is the largest industry in our economy with over $4 trillion spent per year. Healthcare delivery systems and healthcare providers account for over $2 trillion of that spend, so that feels like a pretty good place to start, right? For that reason alone, it’s critical to listen closely to the executives in those organizations, as their decisions will affect the quality, access and cost of care more than any other stakeholder in healthcare.
Some will say that what they saw this year from healthcare providers was more of the same, but I encourage you to ignore that cynicism and look more closely. As the futurist William Gibson once said, “The future is already here — it’s just not evenly distributed.” The potential for any health system to drive major change is certainly there and the examples are everywhere. The biggest blocker is whether they are asking the right questions. One question can change everything. Here’s proof.
The stunning power of and need for good questions
Last year I titled my summary “The #1 Takeaway from the 2019 JP Morgan Conference – It’s the Platform, Stupid.” The overwhelming response to the article was pretty surprising to me — it really resonated with leaders. One example was Jeff Bolton, the chief administrative officer of Mayo Clinic, who told me that the article had inspired their team to ask a single question, “Does Mayo need to be a platform?” They answered the question “yes” and then took aggressive action to activate a strategy around it. Keep reading to learn about what they set in motion.
Soon after, I had a discussion with John Starcher, CEO of Cincinnati-based Bon Secours Mercy Health, one of the largest health systems in the country, who shared with me that he is taking his team off site for a few days to think about their future. It occurred to me that the most helpful thing for his team wouldn’t be a laundry list of ideas from the other 30 healthcare delivery systems that presented, but rather the questions that they asked at the board and executive level that drove their strategy. Any of those questions would have the potential to change the game for John’s team or any executive team. After all, if you’re going to change anything, the first thing you need to do is change is your mind.
The wisdom of the crowd
So, I set out to figure this out: If you were having a leadership or board retreat, what are the 10 questions you should be asking and answering that may change the future of your organization over the next 10 years? I didn’t have the answers, so I decided to tap into the wisdom of the crowd, listening to all 30 of the nonprofit provider presentations, spending additional time with a number of the presenters and reaching out to dozens of experts in the market to help define and refine a set of 10 questions that could spark the conversation that fires up an executive team to develop to the right strategy for their organization.
A special thank you to a number of the most respected leaders in healthcare who took their time to contribute to and help think through these questions:
Here are the top 10 questions from the 2020 J.P. Morgan Healthcare Conference
Based on the wisdom of the crowd including the 30 nonprofit provider presentations at the 2020 JP Morgan Healthcare Conference, here are the Top 10 Questions that every CEO needs to answer that may make or break their next 10 years.
1. Business model: Will we think differently and truly leverage our “platform?” As referenced earlier in this article, this was the major theme from last year — health systems leveraging their current assets to build high-value offerings and new revenue streams on top of the infrastructure they have in place. Providers are pivoting from the traditional strategy of buying and building hospitals and simply providing care toward a new and more dynamic strategy that focuses on leveraging the platform they have in place to create more value and growth. Mayo Clinic is an organization that all health systems follow closely. Mayo adopted the platform model around their ‘digital assets’ into what they refer to as Mayo Clinic Platform, which initially targets three game-changing initiatives: a Home Hospital to deliver more health in the home even for high acuity patients, a Clinical Data Analytics Platform for research and development and an Advanced Diagnostics Platform focused on predictive analytics, using algorithms to capture subtle signals before a disease even develops. Children’s Hospital of Philadelphia, one of the top pediatric hospitals in the world, is leveraging their platform to drive international volume, where revenue is 3.5x more per patient. They are also making investments in cell and gene therapy, where their spinoff of Spark Therapeutics returned hundreds of millions of dollars back to their organization. Both organizations were clear that any returns that they generate will be re-invested back into raising the bar on both access to care and quality of care.
2. Market share: Are we leveraging a “share of cup” strategy? Starbucks had dominant share in the market against Caribou Coffee, Peet’s Coffee and Dunkin’ Donuts. Instead of solely focusing on how to grab a little more market share, they reframed the definition of their market. They called it “share of cup” meaning that anywhere and any time a cup of coffee was consumed, they wanted it to be Starbucks. In that definition of the market, they had very little share, but enormous growth potential. Hospital for Special Surgery in New York is the largest and highest volume orthopedic shop in the world. Their belief is that wherever and whenever a musculoskeletal issue occurs, they should be part of that conversation. This thinking has led them to build a robust referral network, which 33 percent of the time leads to no surgical treatment. So instead of fighting for share of market in New York, they have a very small share and a very big opportunity in a “share of cup” approach. NorthShore University Health System in Illinois has taken a similar approach on a regional level, converting one of their full-service hospitals into the first orthopedic and spine institute in the state. The results have exceeded expectations on every measure and they already have to increase their capacity due to even higher demand than they originally modeled.
3. Structure: Are we a holding company or an operating company? There has been a tremendous amount of consolidation over the last few years, but questions remain over the merits of those moves. The reality is that many of these organizations haven’t made the tough decisions and are essentially operating as a holding company. They are not getting any strategic or operational leverage. You can place all health systems on a continuum along these two endpoints — being a holding vs. an operating company — but the most critical step is to have an open conversation about where you’re at today, where you intend to be in the future, when you’re going to get there and how you’re going to make it happen. Bon Secours Mercy Health’s CEO John Starcher shared, “It makes sense to merge, but only if you’re willing to make the tough decisions.” His team hit the mark on every measure of their integration following their merger. They then leveraged that same competency to acquire the largest private provider of care in Ireland, as well as seven hospitals in South Carolina and Virginia. Northwestern Medicine has leveraged a similar approach to transform from a $1 billion hospital into a $5 billion health system in a handful of years. Both of these organizations prioritized and made tough decisions quickly and each has created an organizational competency in executing efficiently and effectively on mergers and acquisitions.
4. Culture: Do we have employees or a team? Every organization states that their employees are their most important asset, but few have truly engaged them as a team. Hospitals and healthcare delivery systems can become extraordinarily political, and it’s easy to see why. These are incredibly complex businesses with tens of thousands of employees in hundreds of locations and thousands of departments. Getting that type of organization to move in the same direction is incredibly challenging in any industry. At the same time, the upside of breaking through is perhaps the most important test of any leadership team. JP Gallagher, CEO of North Shore University Health System, shared his perspective that, “Healthcare is a team sport.” The tough question is whether or not your employees are truly working as a team. Christiana Care provides care in four states — Delaware, Maryland, Pennsylvania and New Jersey. They have taken a unique approach that they frame as “for the love of health,” incorporating the essence of what they do in every communication both internally and externally, in their values and in their marketing. In a multi-state system, it is tricky to create a caring and collaborative culture, but it’s critical and they’ve nailed it. Their CEO shared that, “If you lead with love, excellence will follow.” That’s not only well said but spot-on. Creating a world-class team requires not only loving what you do, but the team you’re part of.
5. Physicians: Are our physicians optimistic or pessimistic? There’s a lot of concern about “physician burnout” with a reflex to blame it on EHRs, cutting off the needed conversation to dive deeper into where it really comes from and how best to address it. The challenge over the next decade is to create an optimistic, engaged and collaborative culture with physicians. In reading this, some will react with skepticism, which is exactly why leadership here is so important. One suggestion I was given was to make this question edgier and ask, “Are our physicians with us or not?” However the question is asked, the bottom line is that leadership needs to find a way to turn this into a dynamic, hyper-engaged model. A little while back I spent the day with the leadership team at Cleveland Clinic. At the end of the day, their CEO Dr. Tom Mihaljevic was asked what he would tell someone who was thinking of going to medical school. He said he would tell them that, “This is absolutely the best time to be a doctor.” His answer was based on the fact that there has never been a time when you could do more to help people. He wasn’t ignoring the challenges, he was simply reframing those issues as important problems that smart people need to help solve in the future. Those who adopt that type of optimism and truly engage and partner with their physicians will create a major competitive advantage over the next decade.
6. Customer: Do we treat sick patients or care for consumers? Words matter here – patients vs. consumers. Most hospitals are in a B2B, not B2C, mindset. Patients get sick, they try to access care, they check into an ER, they get admitted, they are treated, they get discharged. People get confused, anxious and concerned, then they seek not only care, but simplicity, compassion and comfort. With half of America coming through their stores every week, Walmart is already the largest provider organization that no one thinks of as they provide ‘consumer’ care, not ‘patient’ care. But they are starting to broaden their lens, and health systems will need to make moves as well. Competing with Walmart, CVS and other consumer-centric models will require a different mindset. I think Dr. Janice Nevin, the CEO ChristianaCare, captured this really well when she said, “Our mindset is that our role is to ensure everything that can be digital will be digital. Everything than can be done in the home will be done in the home.” Henry Ford Health System CEO Wright Lassiter commented, “Trust is the fundamental currency in healthcare.” Building that trust will require a digital experience in the future that is just as compassionate and caring as what health systems strive to deliver in person in the past.
7. Data: Will we make data liquid? The most undervalued and misunderstood asset of health systems may be their data. While some at the conference refer to this as having the economic equivalent of being the “oil of healthcare,” the real and more practical question is whether or not your organization will make data liquid, available and accessible to the right players on your team at the right time. Jeff Bolton from Mayo commented that, “The current model is broken. Data and tech can eliminate fragmentation.” In a recent Strata survey, we asked leaders in health systems whether they had access to the information they needed to do their job, and 90 percent said no. For many health systems, data is a science project, hidden behind the scenes primarily used for research and impossible to access for most stakeholders. The call to action is activating that data to improve clinical outcomes, operations and/or financial performance.
8. Cost: Are we serious about reducing the cost of care and delivering value? Affordability is a hot topic, and for good reason, as high deductible plans, price transparency and other factors have accelerated its urgency. As Intermountain Healthcare CEO Dr. Marc Harrison shared, “We have an absolute responsibility to make healthcare affordable.” While the consumer side will be a moving target for some time, the No. 1 challenge for hospitals right now is to lower their cost structure so they can compete more effectively in the future. Advocate Aurora Health, Baylor Scott & White Health, CommonSpirit Health and many others are targeting cost reductions of over $1 billion over the next few years. As most hospitals are now in a continuous process to reduce cost in order to compete more effectively in the future, organizations like Yale New Haven Health in Connecticut have implemented advanced cost accounting solutions to better understand both cost and margins. Yale is using this data to understand variation, supporting an initiative that drove over $150 million in savings. Additionally, they have combined cost data with clinical feeds from their EHR to understand the cost of harm events, which turn out to be 5x more expensive. As more providers take on risk, having a “source of truth” on the cost of care will be essential. Advocate Aurora Health CFO Dominic Nakis shared that, “We believe the market will continue to move to taking on risk.” Many of the presenting organizations shared that same perspective, but they won’t be able to manage that risk unless they understand the cost of care for every patient at every point of care across the continuum every day.
9. Capital: Do we have an “asset-light” strategy? Traditional strategy for health systems was defined primarily by what they built or bought. Many hospitals still maintain an “if you build it, they will come” strategy at the board level. Yet, Uber has become the biggest transportation company in the world without owning a single car and Airbnb has become the biggest hospitality company in the world without owning a single room. These models are important to reflect upon as healthcare delivery systems assess their capital investment strategy. Intermountain Healthcare CFO Bert Zimmerli refers to their overall thought process as an “asset-light expansion strategy.” In 2019, they opened a virtual hospital and they have now delivered over 700,000 virtual interactions. The number of virtual visits at Kaiser Permanente now exceeds the number of in-person visits at their facilities. With that said, there will be a balance. I really like how Robin Damschroder the CFO of Henry Ford Health System framed it: “We believe healthcare will be more like the airline and banking industry, both of which are fully digitally enabled but have a balance of ‘bricks and clicks’ with defined roles where you can seamlessly move between the two. Clearly, we have a lot of ‘bricks’ so building out the platform that integrates ‘clicks’ is essential.”
10. Performance: Do we want our team to build a budget or improve performance? The most significant barrier to driving change that many organizations have baked into their operating model is their budget process. The typical hospital spends close to five months creating a budget that is typically more than $100 million off the mark. After it’s presented to the board, it is typically thrown out within 90 days. It creates a culture of politics, entitlement and inertia. According to a Strata survey of 200 organizations, close to 40 percent are now ditching the traditional budget process in favor of a more dynamic approach, often referred to as Advanced Planning. OSF HealthCare leverages a rolling approach, radically simplifying and streamlining the planning process while holding their team accountable for driving improvement vs. hitting a budget. When it comes to driving performance, SSM Health CEO Laura Kaiser captured the underlying mindset that’s needed: “We have a strong bias toward purposeful action.” Well said, and it certainly applies to all of the questions here among the top 10.
5 additional questions to consider
As you would imagine or might suggest, the questions above can and in some cases should be replaced with others. Additional critical questions to answer that came from the group included the following:
Start asking questions
The point here isn’t to get locked into a single list of questions, but rather to force your team to ask and answer the most important and challenging ones that will take you from where you are today to where you want to be in the future. After reviewing these questions with your team, the one additional question you need to consider is one of competency: Do you have the ability and bandwidth to execute on what you’ve targeted? In the end, that’s what matters most. While there are many interesting opportunities, too many teams end up chasing too much and delivering too little.
The next 10 years can and should be the best 10 years for every health system and every healthcare provider, but making it happen will require some really tough questions. “The current path we’re on will leave us with a healthcare delivery model that is completely unsustainable,” stated Randy Osstra, CEO of ProMedica Health System. “We need to take meaningful action toward creating a new model of health and well-being — one that supports healthy aging, addresses social determinants of health, encourages appropriate care in the lowest cost setting, and creates funding and incentives to force a truly integrated approach.”
Strong leaders are needed now more than ever. The rest of healthcare is watching, not just professionally but personally. We are all grateful to you for the extraordinary and often heroic care that you deliver without hesitation to our family and friends every day both in our communities and across our country. But now we all need you to not only deliver care, but a new and better version of healthcare. So, ask and answer these and other tough questions. We know you will do everything that you can to help make healthcare healthier for all of us over the next 10 years.
There may be an opportunity to highlight increased revenues for the benefit of local government, since investor-owned hospitals pay taxes.
Remember: Every hospital, regardless of its tax status, must bring in more dollars than it spends in order to be financially healthy and reinvest.
In most communities, the conversion of a hospital from a not-for-profit to an investor-owned enterprise no longer stirs the heated debate that it did decades ago. Instead, you’re much more likely today to see not-for-profit and investor-owned hospital organizations working in partnership.
Renowned not-for-profit health systems such as Duke Health and the Cleveland Clinic have formed strong affiliations with investor-owned hospital companies. In these and other partnerships, not-for-profits and investor-owned organizations are working together to strengthen hospitals, invest in communities, and serve patients.
In fact, the issues facing investor-owned hospital systems during a partnership are the same as those faced by not-for-profit health systems during a partnership discussion: Local control and governance, cultural compatibility, charity care support, and commitment to local investment are leading hot buttons for both.
Still, the “conversion” of a not-for-profit to an investor-owned organization can represent a change that can raise questions and ignite unhelpful rumors.
To help you be prepared, start by answering these basic questions: What’s the difference? How are not-for-profit and for-profit (investor-owned) hospitals different from one another?
Here’s an overview: Independent, not-for-profit hospitals are, in a sense, owned by the communities they serve. The boards are usually comprised of local leaders and physicians. Excess revenues—profits—are fully reinvested into the community’s care after debt payments, payroll, and other expenses. Hospitals that join a regional or national not-for-profit health system, however, may or may not have a local board with a say in the direction of the facility and may or may not share their profits with the system. (In fact, if your local hospital is in financial trouble, the money flows into your hospital, not out of it!)
Investor-owned hospitals are, as you might guess by the name, owned by investors, who can be private individuals or stockholders. Investors traditionally benefit as the value of the company’s hospitals increases over time, through effective operations and local investments, and as the company overall grows by adding more hospitals.
Adding to this complexity is the trend for hospitals to pursue joint venture partnerships where ownership is shared by two or more organizations, including the “seller.” These partnerships call for strong and trusting relationships by every party. Communications is key to success.
Familiarize yourselves with these terms and issues as you move through a partnership. Be prepared for some myth busting.
That’s where the fundamental structural differences end. The driving forces of both organizations, however, are precisely the same:
Now, consider some specific questions you may hear related to the structure of a not-for-profit to investor-owned conversion.
When there are funds left over from a sale, they are often referred to as the proceeds. These proceeds exist once the hospital’s debt and any other obligations (e.g., a pension fund) have been paid.
The answer as to what happens to those dollars depends on the ownership structure of the selling organization and the terms of the transaction. Here are a few scenarios:
This is really a question of community commitment and may be an indicator of how much the community-based culture is or is not going to change under the new ownership. In most cases, a commitment to either a specific level of charity care or a guarantee to continue the hospital’s existing charitable mission and policy is written into the deal documents. Expect the question and know the answer.
An investor-owned hospital pays taxes that benefit local government. This question is an opportunity to highlight the added contribution as a distinct benefit of investor-owned partnerships.
In many cases, the fire department, police force, schools, parks, and other community assets will benefit on an annual basis from an investor-owned partner paying state and local property and sales taxes.
One cautionary note: In some cases, new hospital owners may seek appropriate tax incentives when entering a new community and investing in a hospital. Be sure you understand the local government strategic thinking before you answer the tax question.
All hospitals serve patients, employ physicians and nurses, and operate in tightly regulated frameworks for clinical services. For-profit hospitals add a unique element to the mix: generating return for investors.
This additional ingredient gives the organizational culture at for-profits a subtly but significantly different flavor than the atmosphere at their nonprofit counterparts, says Yvette Doran, chief operating officer at Saint Thomas Medical Partners in Nashville, TN.
“When I think of the differences, culture is at the top of my list. The culture at for-profits is business-driven. The culture at nonprofits is service-driven,” she says.
Doran says the differences between for-profits and nonprofits reflect cultural nuances rather than cultural divides. “Good hospitals need both. Without the business aspects on one hand, and the service aspects on the other, you can’t function well.”
There are five primary differences between for-profit and nonprofit hospitals.
The most obvious difference between nonprofit and for-profit hospitals is tax status, and it has a major impact financially on hospitals and the communities they serve.
Hospital payment of local and state taxes is a significant benefit for municipal and state governments, says Gary D. Willis, CPA, a former for-profit health system CFO who currently serves as CFO at Amedisys Inc., a home health, hospice, and personal care company in Baton Rouge, LA. The taxes that for-profit hospitals pay support “local schools, development of roads, recruitment of business and industry, and other needed services,” he says.
The financial burden of paying taxes influences corporate culture—emphasizing cost consciousness and operational discipline, says Andrew Slusser, senior vice president at Brentwood, TN-based RCCH Healthcare Partners.
“For-profit hospitals generally have to be more cost-efficient because of the financial hurdles they have to clear: sales taxes, property taxes, all the taxes nonprofits don’t have to worry about,” he says.
“One of the initiatives we’ve had success with—in both new and existing hospitals—is to conduct an Operations Assessment Team survey. It’s in essence a deep dive into all operational costs to see where efficiencies may have been missed before. We often discover we’re able to eliminate duplicative costs, stop doing work that’s no longer adding value, or in some cases actually do more with less,” Slusser says.
With positive financial performance among the primary goals of shareholders and the top executive leadership, operational discipline is one of the distinguishing characteristics of for-profit hospitals, says Neville Zar, senior vice president of revenue operations at Boston-based Steward Health Care System, a for-profit that includes 3,500 physicians and 18 hospital campuses in four states.
“At Steward, we believe we’ve done a good job establishing operational discipline. It means accountability. It means predictability. It means responsibility. It’s like hygiene. You wake up, brush your teeth, and this is part of what you do every day.”
A revenue-cycle dashboard report is circulated at Steward every Monday morning at 7 a.m., including point-of-service cash collections, patient coverage eligibility for government programs such as Medicaid, and productivity metrics, he says. “There’s predictability with that.”
A high level of accountability fuels operational discipline at Steward and other for-profits, Zar says.
There is no ignoring the financial numbers at Steward, which installed wide-screen TVs in most business offices four years ago to post financial performance information in real-time. “There are updates every 15 minutes. You can’t hide in your cube,” he says. “There was a 15% to 20% improvement in efficiency after those TVs went up.”
Accountability for financial performance flows from the top of for-profit health systems and hospitals, says Dick Escue, senior vice president and chief information officer at the Hawaii Medical Service Association in Honolulu.
Escue worked for many years at a rehabilitation services organization that for-profit Kindred Healthcare of Louisville, Kentucky, acquired in 2011. “We were a publicly traded company. At a high level, quarterly, our CEO and CFO were going to New York to report to analysts. You never want to go there and disappoint. … You’re not going to keep your job as the CEO or CFO of a publicly traded company if you produce results that disappoint.”
Finance team members at for-profits must be willing to push themselves to meet performance goals, Zar says.
“Steward is a very driven organization. It’s not 9-to-5 hours. Everybody in healthcare works hard, but we work really hard. We’re driven by each quarter, by each month. People will work the weekend at the end of the month or the end of the quarter to put in the extra hours to make sure we meet our targets. There’s a lot of focus on the financial results, from the senior executives to the worker bees. We’re not ashamed of it.”
“Cash blitzes” are one method Steward’s revenue cycle team uses to boost revenue when financial performance slips, he says. Based on information gathered during team meetings at the hospital level, the revenue cycle staff focuses a cash blitz on efforts that have a high likelihood of generating cash collections, including tackling high-balance accounts and addressing payment delays linked to claims processing such as clinical documentation queries from payers.
For-profit hospitals routinely utilize monetary incentives in the compensation packages of the C-Suite leadership, says Brian B. Sanderson, managing principal of healthcare services at Oak Brook, IL–based Crowe Horwath LLP.
“The compensation structures in the for-profits tend to be much more incentive-based than compensation at not-for-profits,” he says. “Senior executive compensation is tied to similar elements as found in other for-profit environments, including stock price and margin on operations.”
In contrast to offering generous incentives that reward robust financial performance, for-profits do not hesitate to cut costs in lean times, Escue says.
“The rigor around spending, whether it’s capital spending, operating spending, or payroll, is more intense at for-profits. The things that got cut when I worked in the back office of a for-profit were overhead. There was constant pressure to reduce overhead,” he says. “Contractors and consultants are let go, at least temporarily. Hiring is frozen, with budgeted openings going unfilled. Any other budgeted, but not committed, spending is frozen.”
The for-profit hospital sector is highly concentrated.
There are 4,862 community hospitals in the country, according to the American Hospital Association. Nongovernmental not-for-profit hospitals account for the largest number of facilities at 2,845. There are 1,034 for-profit hospitals, and 983 state and local government hospitals.
In 2016, the country’s for-profit hospital trade association, the Washington, DC–based Federation of American Hospitals, represented a dozen health systems that owned about 635 hospitals. Four of the FAH health systems accounted for about 520 hospitals: Franklin, TN-based Community Hospital Systems (CHS); Nashville-based Hospital Corporation of America; Brentwood, TN–based LifePoint Health; and Dallas-based Tenet Healthcare Corporation.
Scale generates several operational benefits at for-profit hospitals.
“Scale is critically important,” says Julie Soekoro, CFO at Grandview Medical Center, a CHS-owned, 372-bed hospital in Birmingham, Alabama. “What we benefit from at Grandview is access to resources and expertise. I really don’t use consultants at Grandview because we have corporate expertise for challenges like ICD-10 coding. That is a tremendous benefit.”
Grandview also benefits from the best practices that have been shared and standardized across the 146 CHS hospitals. “Best practices can have a direct impact on value,” Soekoro says. “The infrastructure is there. For-profits are well-positioned for the consolidated healthcare market of the future… You can add a lot of individual hospitals without having to add expertise at the corporate office.”
The High Reliability and Safety program at CHS is an example of how standardizing best practices across the health system’s hospitals has generated significant performance gains, she says.
“A few years ago, CHS embarked on a journey to institute a culture of high reliability at the hospitals. The hospitals and affiliated organizations have worked to establish safety as a ‘core value.’ At Grandview, we have hard-wired a number of initiatives, including daily safety huddles and multiple evidence-based, best-practice error prevention methods.”
Scale also plays a crucial role in one of the most significant advantages of for-profit hospitals relative to their nonprofit counterparts: access to capital.
Ready access to capital gives for-profits the ability to move faster than their nonprofit counterparts, Sanderson says. “They’re finding that their access to capital is a linchpin for them. … When a for-profit has better access to capital, it can make decisions rapidly and make investments rapidly. Many not-for-profits don’t have that luxury.”
There are valuable lessons for nonprofits to draw from the for-profit business model as the healthcare industry shifts from volume to value.
When healthcare providers negotiate managed care contracts, for-profits have a bargaining advantage over nonprofits, Doran says. “In managed care contracts, for profits look for leverage and nonprofits look for partnership opportunities. The appetite for aggressive negotiations is much more palatable among for-profits.”