Category Archives: Strategy

Cartoon – Lack of Strategy

Posted on by • Posted in 2020 Election Issues, Accountability, Cartoon, Coronavirus, Crisis, Crisis Management, Economic Crisis, Economic Recovery, Economy Reopening, Leadership Decentralized, Mortality, National Strategy, Pandemic, Public Good, Public Health, Public Safety, Public Trust, Quarantine, Shortsightedness, Social Distancing, Strategic Leadership, Strategy, Strategy National • Leave a comment

Lack Of Strategy - Dilbert Comic Strip on 2019-10-11 : dilbert

Despite COVID-19, less dramatic decline in Q2 M&A than expected, Kaufman Hall reports

Posted on by • Posted in Health System, Hospital, Hospital Industry, Market Consolidation, Mergers & Acquisitions, Pandemic, Strategy • Leave a comment

https://www.fiercehealthcare.com/hospitals/despite-covid-less-dramatic-decline-q2-m-a-than-expected-kaufman-hall-reports?mkt_tok=eyJpIjoiT1RJMlpqWTNPREJtTmpGaSIsInQiOiJ0enNDdXU5R0ZEdUJmSE1GcXl5UHd4VjdcL1FQcWE3ckN2YmhLVUhnazNFNlhUOEdLQndTcnRnXC9TbWNzWDhZMW5KWEhtMUxJRDRFdG1uXC84NGVhTHZ5QklGK0Fyc2dadXVcL0phNWFaVGY1SGlVVzN6NFRxVlRLOE9mRmdHR2VmdDgifQ%3D%3D&mrkid=959610

Mergers and acquisitions deals consolidation

While the COVID-19 pandemic has done a financial number on organizations across the healthcare industry, it did not stymie mergers and acquisition deals as much as anticipated, according to a new report.

Kaufman Hall officials said in their latest M&A report that deals in the second quarter declined in comparison to the same quarter a year earlier.

However, they said, two “transformational” deals announced in June pushed the quarter to a far less dramatic decline in deal activity relative to the underlying performance measures in the sector—and could even indicate deals will ramp up in the near future.

“I don’t think there could’ve been any sort of realistic expectations of what might’ve happened as a result of the pandemic,” the report’s author Anu Singh, managing director and leader of the mergers, acquisitions and partnerships practice, told Fierce Healthcare.

“I think there was a feeling that because of what this would do to financial performance and maybe the trajectory of the industry participants themselves, there was a thought this would perhaps significantly slow down transaction activity as well,” Singh said. “And, as the quarter played out, there was not a significant … drop in the level of activity.”

Deals in the second quarter included Steward Health Care’s acquisition by a group of affiliated physicians and Advocate Aurora Health proposed a merger with Beaumont Health. Lifespan and Care New England Health System in Rhode Island also resumed partnership talks.

“What we were, perhaps, a little surprised to see is there still was large scale transformational system partnership. There still was large portfolios of for-profit or hospital management companies looking to retool their portfolio,” Singh said. “There still was a need for community hospitals to look upwards to find the benefits of larger health systems.”

Overall, the report says, there were 14 deals in the second quarter, down from 19 deals in the same quarter a year earlier and down from 29 deals in the first quarter of 2020.

The report also found:

  • At more than $800 million, the second quarter had one of the highest figures for average size of seller by revenue ever recorded by Kaufman Hall. The historic high previous recorded in 2018 was $409 million.
  • Total transacted revenue for the quarter was just over $12 billion.
  • Nine of the 14 transactions were by for-profit hospital and health systems. None of the transactions in the last quarter were completed by academic medical centers or religiously affiliated health systems.

Impact of COVID-19

So what does the second quarter say about the potential future impact of the COVID-19 pandemic on deals? Singh wrote that while health systems paused their activities for a while, the pandemic may also have “strengthened their rationale” for partnering up in the first place.

Like leaders in many other sectors, healthcare leaders are reevaluating their business and may be examining their healthcare delivery models, Singh said.

The pandemic may have been a catalyst for more organizations to work together to serve patients, which could support reevaluation of the potential for future deals. As an example, Singh pointed in the report to Lifespan and Care New England, which had suspended talks for a potential deal in 2019 but restarted talks after the two systems began “working together in unprecedented ways,” in response to the crisis.

Finally, for-profit health systems have continued to reshape their portfolios over the quarter, with six of the 14 transactions representing divestitures by major for-profit health systems including Community Health Systems, Quorum and HCA.

“For many organizations, it’s going to serve as a reminder or a catalyst that there is safety in scale,” Singh said. “There is safety in being part of a large system that has more deployable resources and maybe more capabilities to deal with situations like that.”

 

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.”

 

 

 

 

Gladwell: COVID-19 should push healthcare to consider its ‘weak links’

Posted on by • Posted in America's Health Insurance Plans (AHIP), Health Insurance Industry, Health System, Hospital, Hospital Industry, Investment, Investments, Leadership, Social Determinants of Health, Strategy, Strong Link Approach, Supply Chain, Weak Link Approach • Leave a comment

https://www.fiercehealthcare.com/payer/malcolm-gladwell-covid-19-should-push-healthcare-to-consider-its-weak-links?mkt_tok=eyJpIjoiWlRJMk9UYzVZVFl4Tm1VMSIsInQiOiJ0aElzSllzTkpISWNIcU13ZXErNVdPSzU3K05cLzRVY2FEWFMycDNHZTZcLzlTYUo3UVNNQXd3ZjlwZXlFbVA3c3NQTHI0NFhqcjhFNk1VUXc4aVlnYW9aSnFVOVIydEFqWG5weWdEc2Viall1elwvK0RIRWtEajhPWGw3TEFTNDlkUCJ9&mrkid=959610

Gladwell: COVID-19 should push healthcare to consider its 'weak ...

The coronavirus pandemic has shown the healthcare industry that it needs to decide whether it’s playing basketball or soccer, journalist and author Malcolm Gladwell said. 

Gladwell, the opening keynote speaker at America’s Health Insurance Plans’ annual Institute & Expo, said the two sports exemplify the differences in thinking when one tackles problems using a “strong link” approach versus a “weak link” approach.

In basketball, he said, the team is as strong as its strongest, most high-profile players. In soccer, by contrast, the team is only as strong as its weakest players.

For healthcare organizations, that means making investments in the “weakest links”—such as harried clinicians who may need more training and low-income communities that cannot afford or access coverage—rather than the stronger links, like building out teaching hospitals and physician specializations.

“In healthcare, this is a chance for us to turn the ship around and say we can benefit far more from making health insurance more plentiful and more affordable,” Gladwell said. 

Gladwell emphasized that healthcare is far from the only industry to largely follow a “strong link” approach to improvement. In higher education, for example, much of the investment and funding goes to Ivy League institutions and other wealthy, top-performing universities.

Meanwhile, the education system could see significant benefits if it invested in the “weak links” like community colleges and bringing down tuition, Gladwell said. 

It’s a similar story in national security—and that “strong link” thinking led to two of the largest security breaches in American history, Gladwell said. Both Edward Snowden and Chelsea Manning were relatively low-ranking people within the security apparatus, but they were able to access critical files and release them.

“I would argue that ‘strong link’ paradigm has dominated every part of American society,” Gladwell said. “We have really put our chips down on the ‘strong link’ paradigm.” 

How could a “weak link” approach have impacted the response to the COVID-19 pandemic? Gladwell argues that, for instance, widespread testing is hampered by a lack of supplies like nasal swabs. Investment in the supply chain could have mitigated that challenge, he said.

The virus also disproportionately impacts people with certain conditions, notably diabetes. A broader focus on preventing and treating obesity could have had a large impact on how the pandemic played out, he said. 

“With this particular pandemic, I think we’re having a wake-up call,” Gladwell said.

 

 

 

INSIGHT: Health-Care M&A Post-Pandemic—Opportunities, Not Opportunism

Posted on by • Posted in Balance Sheet, Cash, Cash Reserves, Communication, Coronavirus, Executive Compensation, Financially Distressed, Health System, Hospital, Hospital Industry, Market Consolidation, Market Outlook, Market Power, Mergers & Acquisitions, Pandemic, Public Perception, Severance Compensation, Stakeholder, Strategy • Leave a comment

https://news.bloomberglaw.com/health-law-and-business/insight-health-care-m-a-post-pandemic-opportunities-not-opportunism

INSIGHT: Health-Care M&A Post-Pandemic—Opportunities, Not Opportunism

The Covid-19 pandemic has devastated the health-care industry. In addition to the tragedies that the pandemic has brought, health systems have universally experienced severe and rapid deterioration of their bottom lines due to plummeting patient volumes, pausing of high margin elective surgical procedures, and increased expenses.

By some estimates, health system losses will be around $200 billion by the end of June and revenues have dropped by around 50 percent. As a result of the financial uncertainty caused by the pandemic, many hospital and health systems terminated or delayed potential transactions as they focused on managing the crisis and protecting their workforces and communities.

But this may just be the calm before a big M&A storm.

Rise in M&A Activity

Through our work as legal and communications counselors, we have seen preliminary M&A activity rise in recent weeks, with providers exploring and negotiating transactions, including several that have not yet been publicly announced.

Some systems are looking to capitalize on the time between the end of the first wave of Covid-19 and a potential resurgence in the fall to get letters of intent finalized and announced. This coming M&A activity presents legal and communications challenges when the national spotlight is firmly on health systems.

Providers are starting to resurrect deals that were paused during the initial period of the Covid-19 crisis, including Community Health System’s sale of Abilene Regional Medical Center and Brownwood Regional Medical Center to Hendrick Health System.

Some systems are seeking new strategic partners, such as Lake Health in Ohio, and New Hanover Regional Medical Center in North Carolina, which resumed its recent RFP response process after a pause.

Still others are looking for new opportunities consistent with pre-Covid growth strategies, as adjusted for pandemic-related developments and challenges.

More Consolidation

Larger and more financially robust health systems are expected to weather the crisis, whereas smaller systems and hospitals with less cash and tighter operating margins, including rural and critical access hospitals, may be facing insolvency, closure, and bankruptcy. This creates a scenario where one party is financially distressed as a result of the pandemic and needs to partner with or join another system to survive. These circumstances will likely fuel increased consolidation in the health-care industry.

For a struggling provider, joining a larger system can offer much-needed financial commitments, access to capital, disciplined management structure, economies of scale for purchasing and improved IT infrastructure, among many other strategic benefits. A well-positioned system, even if financially weakened due to pandemic challenges, will be able to negotiate favorable deal terms if it has significant strategic value to its prospective partner.

Communications Strategy is Important

As providers explore and execute partnerships, they must implement a stakeholder and communications strategy that focuses on benefits for each side given the new financial reality. Doing so will minimize criticism of opportunism by the acquiring system—and best position a definitive agreement and successful deal.

An effective communications strategy will emphasize how the proposed transaction will maintain or improve quality or affordability, ensure access to care for communities and address financial challenges faced by health systems as a result of the pandemic.

Health systems should articulate how their M&A activity will stabilize affected health systems, allow them to manage the Covid-19 crisis and future pandemics, and continue to meet the overall care needs of the community. It can also highlight how these partnerships will facilitate continued care in a market, which otherwise might lose a valuable health-care resource, as well as the positive economic benefits the transaction will bring for local communities.

Communications that support the vision, rationale and benefits of a deal will also need to be relevant to the regulatory bodies whose approval may be required.

Public perception and support of health-care providers have been extremely positive during the pandemic to date, as evidenced by homemade banners, balcony tributes, and praise on social media. Health systems and their staffs have borne personal risk and financial pain by focusing on patients and public health at the expense of all else. This goodwill can be valuable as health systems seek stakeholder and community support for their transactions.

That goodwill can also quickly be forgotten.

As health systems race to the altar to beat out competitors for M&A targets and other strategic relationships, it is critical that they are thoughtful in structuring their deals and justifying the activity.

For example, acquisitions and partnerships involving substantial outlays of capital and lucrative executive compensation or severance packages will be viewed negatively if undertaken by a system that instituted large compensation reductions across the system or even furloughed or laid off employees during the pandemic.

As the dust begins to settle from the first wave of Covid-19, it is clear that there will be drastic changes to how health systems do business. The pandemic will also create financial winners and losers. Hospitals and health systems must think proactively about a strategy for growth as opportunities with willing transaction partners arise.

But being proactive must be balanced against appearing to be opportunistic or taking advantage of the worst health crisis in our lifetimes. To maintain their goodwill and reputations, health systems should continue to do deals for the right reasons and for the benefit of their communities.

 

 

 

Insurers continue to pay rebates while providers struggle

Posted on by • Posted in ACA, Health Insurance Industry, Market Consolidation, Medical Loss Ratio (MLR), Physician Practice Valuation, Strategy, Vertical Integration • Leave a comment

https://mailchi.mp/f2774a4ad1ea/the-weekly-gist-may-22-2020?e=d1e747d2d8

Reform Brings More Health Insurance Rebates | Bankrate.com

Blue Cross Blue Shield of Michigan became the latest health insurer to announce plans to refund money to its enrollees, as reimbursement for healthcare services dropped in the wake of the coronavirus pandemic, with many hospitals and physicians curtailing operations. The company will return $100M to enrollees, in the form of premium discounts and refunds, and said it might increase that amount later in the year depending on how quickly health spending picks up again.

UnitedHealthcare (UHC), Cigna, and Humana are among the other insurers who have recently announced similar plans, with UHC alone slated to give back $1.5B to purchasers. Under the Affordable Care Act, plans must spend between 80 and 85 percent of the premiums they collect on medical care, depending on the segment of the market they cover, and must return excess profits to purchasers if they do not. Insurers are getting ahead of this requirement by returning money now to their employer and individual-market customers.

Meanwhile, some industry observers have begun to question why insurers, who have weathered the pandemic in good financial shape, are not spending more to stabilize the operations of struggling hospitals and physicians in their networks. For instance, Harvard researchers Leemore Dafny and Michael McWilliams proposed this week that insurers extend a “primary care boost” of 50 percent to their payments to doctors through the end of this year. Getting plans to act in concert to support providers will prove to be challenging, of course, and the temptation to free-ride on others’ generosity and instead “spend” excess premium dollars to return cash to customers may prove too strong for its public relations and loyalty benefits.

Or perhaps there are more Machiavellian motives at play: allowing physician practices to suffer financially could result in lower practice valuations, as insurers set their sights on further “vertical integration” plays in the months to come.

 

 

 

Employers seeking a “source of truth” for coronavirus guidance

Posted on by • Posted in 2020 Election Issues, Clinical Testing, Coronavirus, Credibility, Crisis, Crisis Management, Economic Crisis, Economy Reopening, Employee Benefits, Employee Protections, Employer-Based Health Insurance, Health Insurance Industry, Health Policy, Health System, Hospital, Hospital Industry, Infection Control, Infection Control Plan, Infectious Virus, Mortality, Narrow Network, Network Design, Pandemic, Personal Protective Equipment (PPE), Public Health, Public Safety, Strategy, Supply Chain, Transparency, Trust, Truth • Leave a comment

https://mailchi.mp/f2774a4ad1ea/the-weekly-gist-may-22-2020?e=d1e747d2d8

What Is Truth? | Psychology Today

As states begin to reopen, employers need guidance to ensure safe, COVID-free operations, and are beginning to call local health systems for advice on how to manage this daunting task. Providing this support is uncharted territory for most systems, and they’re learning on the fly as they bring back shuttered outpatient services and surgery centers themselves. This week we convened leaders from across our Gist Healthcare membership to share ideas on how to assist employers in bringing businesses safely back online—and to discuss whether the pandemic might create broader opportunities for working with the employer community.

It’s no surprise some companies are hoping that providers can step in to test their full workforce, but as several systems shared, “Even if we thought that was the right plan, testing supplies and PPE are still too limited for us to deliver on it now.” Better to support businesses in creating comprehensive screening strategies (with some offering their own app-based solutions), coupled with a testing plan for symptomatic employees.

Health systems have been surprised by the hunger for information on COVID-19 among the business community. Hundreds of companies have registered for informational webinars, hosted by systems through their local chambers of commerce. They’re excited to receive distilled information on local COVID-19 impact and response. As one leader said, the system isn’t really creating new educational content, but rather summarizing and synthesizing CDC, state and local guidance.

Business leaders are looking for “a source of truth” from their local health system amid conflicting guidelines and media reports. Case in point: employers are asking about the need for antibody testing, having been approached by testing vendors and feeling pressure from employees. Guidance from system doctors provides a plain-spoken interpretation on testing utility (great for looking at a population, meaningless right now for an individual), and helps them make smarter decisions and educate their workforce.

Health systems are hopeful that helping employers through the coronavirus crisis will lay the foundation for longer-term partnerships with employers, allowing them to continue to provide benefits through lower cost, coordinated care and network options. 

Timing is critical, and it may be smaller businesses that have the ability to change more quickly. Large companies have mostly locked in their benefits for 2021, whereas many mid-market businesses are looking for alternative options now.

Worksite health, telemedicine, and direct primary care arrangements are all on the table. One system surveyed local brokers and employers and found that 20 percent of mid-market employers are open to narrow-network partnerships. “The number seems low,” they reported, “but it’s up from five percent last year, a huge jump.” For systems seeking direct partnerships with employers, there’s a window of opportunity right now to find those businesses committed to continuing to offer benefits, who are looking for a creative, local alternative—and to get that first Zoom meeting on the calendar.