Category Archives: Strategy

In healthcare’s game of Monopoly, one player will control the board

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In healthcare, as in life, people devote a lot of time and attention to the way things should be. They’d be better off focusing on what actually could be.

As an example, 57% to 70% of American voters believe our nation “should” adopt a single-payer healthcare system like Medicare For All. Likewise, public health advocates insist that more of the nation’s $4 trillion healthcare budget “should” be spent on combating the social determinants of health: things like housing insecurity, low-wage jobs and other socioeconomic stresses. Neither of these ideas will happen, nor will dozens of positive healthcare solutions that “should” happen.

When the things that should happen don’t, there’s always a reason. In healthcare, the biggest roadblock to change is what I call the conglomerate of monopolies, which includes hospitals, drug companies, private-equity-staked physicians and commercial health insurers. These powerful entities exert monopolistic control over the delivery and financing of the country’s medical care. And they remain fiercely opposed to any change in healthcare that would limit their influence or income.

This article concludes my five-part series on medical monopolies with an explanation of why (a) “should” won’t happen in healthcare but (b) industrywide disruption will.

Why government won’t lead the way

With the U.S. Senate split 51-49 and with virtually no chance of either party securing the 60 votes needed to avoid a filibuster, Congress will, at most, tinker with the medical system. That means no Medicare For All and no radical redistribution of healthcare funds.

Even if elected officials started down the path of major reform, healthcare’s incumbents would lobby, threaten to withhold campaign contributions (which have exceeded $700 million annually for the past three years) and swat down any legislative effort that might harm their interests.

In American politics, money talks. That won’t change soon, even if voters believe it should.

American employers won’t lead, either

Private payers wield significant power and influence of their own. In fact, the Fortune 500 represents two-thirds of the U.S. GDP, generating more than $16 trillion in revenue. And they provide health insurance to more than half the American population.

With all that clout, you’d think business executives would demand more from healthcare’s conglomerate of monopolies. You might assume they’d want to push back against the prevailing “fee for service” payment model, replacing it with a form of reimbursement that rewards doctors and hospitals for the quality (not quantity) of care they provide. You’d think they would insist that employees get their care through technologically advanced, multispecialty medical groups, which deliver superior outcomes when compared to solo physician practices.

Instead, companies take a more passive position. In fact, employers are willing to shoulder 5% to 6% increases in insurance premiums each year (double their average rate of revenue growth) without putting up much or any resistance.

One reason they tolerate hefty rate hikes—rather than battling insurers, hospitals and doctors— involves a surprising truth about insurance premiums. Business leaders have figured out how to transfer much of their added premium costs to employees in the form of high-deductible health plans. A high deductible plan forces the beneficiary to pay “first dollar” for their medical care, which significantly reduces the premium cost paid by the employer.

Businesses also realize that high deductibles will only financially burden employees who experience an unexpected, catastrophic illness or accident. Meaning, most workers won’t feel the sting in a typical year. As for employees with ongoing, expensive medical problems, employers typically don’t mind watching them walk out the door over high out-of-pocket costs. Their departures only reduce the company’s medical spend in future years.

Finally, businesses know that employee medical costs are tax deductible, which cushions the impact of premium increases. So, what starts as a 6% annual increase ends up costing employees 3%, the government 1% and businesses only 2%. In today’s strong labor market, which boasts the lowest unemployment rate in 54 years, businesses are reluctant to demand changes from healthcare’s biggest players—regardless of whether they should.

Leading the healthcare transformation

If there were a job opening for “Leader of the American Healthcare Revolution,” the applicant pool would be shallow.  

Elected officials would shy away, fearing the loss of campaign contributions. Businesses and top executives would pass on the opportunity, preferring to shift insurance costs to employees and the government. Patients would feel overwhelmed by the task and the power of the incumbents. Doctors, nurses and hospitals—despite their frustrations with the current system—would want to take small steps, fearful of the conglomerate of monopolies and the risks of disruptive change.

To revolutionize American medicine, a leader must possess three characteristics:

  1. Sufficient size and financial reserves to disrupt the entire industry (not just a small piece of it).
  2. Presence across the country to leverage economies of scale.
  3. Willingness to accept the risks of radical change in exchange for the potential to generate massive profits.

Whoever leads the way won’t make these investments because it “should happen.” They will take the chance because the upside is dramatically better than sitting on the sidelines.

The likely winner: American retailers

Amazon, CVS, Walmart and other retail giants are the only entities that fit the revolutionary criteria above. In healthcare’s game of monopoly, they’re the ones willing to take high-stakes risks and capable of disrupting the industry.

For years, these retailers have been acquiring the necessary game pieces (including pharmacy services, health-insurance capabilities and innovative care-delivery organizations) to someday take over American healthcare.

CVS Health owns health insurer Aetna. It bought value-based care company Signify Health for $8 billion, along with national primary care provider OakStreet Health for $10.6 billion. Walmart recently entered into a 10-year partnership with the nation’s largest insurance company, UnitedHealth, gaining access to its 60,000 employed physicians. Walmart then acquired LHC, a massive home-health provider. Finally, Amazon recently purchased primary-care provider One Medical for $3.9 billion and maintains close ties with nearly all of the country’s self-funded businesses.

Harvard business professor Clay Christensen noted that disruptive change almost always comes from outsiders. That’s because incumbents cling to overly expensive and inefficient systems. The same holds true in American healthcare.

The retail giants can see that healthcare is exorbitantly priced, uncoordinated, inconvenient and technologically devoid. And they recognize the hundreds of billions of dollars of revenue and they could earn by offering a consumer-focused, highly efficient alternative.

How will the transformation happen?

Initially, I believe the retail giants will take a two-pronged approach. They’ll (a) continue to promote fee-for-service medical services through their pharmacies and retail clinics (in-store and virtual) while (b) embracing every opportunity to grow their market share in Medicare Advantage, the capitated option for people over age 65.

And within Medicare Advantage, they’ll look for ways to leverage sophisticated IT systems and economies of scale, thus providing care that is better coordinated, technologically supported and lower cost than what’s available now.

Rather than including all community doctors in their network, they’ll rely on their own clinicians, augmented by a limited cohort of the highest-performing medical groups in the area. And rather than including every hospital as an inpatient option, they’ll contract with highly respected centers of excellence for procedures like heart surgery, neurosurgery, total-joint replacement and transplants, trading high volume for low prices.

Over time, they’ll reach out to self-funded businesses to offer proven, superior clinical outcomes, plus guaranteed, lower total costs. Then they’ll make a capitated model their preferred insurance plan for all companies and individuals. Along the way, they’ll apply consumer-driven medical technologies, including next generations of ChatGPT, to empower patients, provide continuous care for people with chronic diseases and ensure the medical care provided is safe and most efficacious.

Tommy Lasorda, the long-time manager of the Los Angeles Dodgers, once remarked, “There are three types of people. Those who watch what happens, those that make it happen and those who wonder what just happened.”

Lasorda’s quip describes healthcare today. The incumbents are watching closely but failing to see the big picture as retailer acquire medical groups and home health capabilities. The retail giants are making big moves, assembling the pieces needed to completely transform American medicine as we think of it today. Finally, tens of thousands of clinicians and thousands of hospital administrators are either ignoring or underestimating the retail giants. And, when they get left behind, they’ll wonder: What just happened?

The conglomerate of monopolies rule medicine today. Amazon, CVS and Walmart believe they should rule. And if I had to bet on who will win, I’d put my money on the retail giants.

Questioning the value of the “medical mall”

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https://mailchi.mp/6f4bb5a2183a/the-weekly-gist-march-24-2023?e=d1e747d2d8

The concept of the “medical mall” is not new. Health systems and physician groups have long looked to build larger outpatient facilities that include several physician specialties, diagnostics, and outpatient procedure all under one roof—sometimes even converting defunct shopping malls. But recently some providers have questioned whether this “one stop shop” approach is delivering the value expected.

One CFO shared, the cost to build and operate these large facilities can be daunting: “we had two of these in our capital plan, but the real estate and construction costs are enormous. Given where margins are this year, we just couldn’t justify them.” 
 
Others have also questioned whether their medical malls provide the value they anticipated. Another leader noted that “it seemed to make sense to put 15 primary care docs under one roof, which let us co-locate a host of other services. But patients told us they’d rather have primary care close to home. And a more distributed ‘low-key’ footprint might have been cheaper.” He also mentioned their operations fell short of the vision: “just because we have primary care and CT under one roof, doesn’t mean we can get a patient on the scanner right after their appointment.”

A physician group with two medical malls found that while they expected the vision to appeal to busy, commercially-insured patients, “it turned out that people with transportation issues or a lot of chronic conditions were the ones who chose to go there…it ended up being primarily a public-pay population, and we can’t support the cost.”

Consumers have rejected shopping malls for more distributed and technology-driven retail options. Given the cost of the medical mall, it’s worth considering whether they’ll apply the same logic to healthcare. 

Humana to exit employer-sponsored insurance market

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https://mailchi.mp/12e6f7d010e1/the-weekly-gist-february-24-2023?e=d1e747d2d8

On Thursday, Louisville, KY-based Humana announced it will wind down its Employer Group Commercial Medical Products business over the next two years. The company said its exit from all fully insured, self-funded, and federal employee medical plans—a book of business that shrunk to under 1M lives in 2022—will allow the company to focus more on its Medicare Advantage (MA) offerings, which covered over 5M lives in 2022. Humana is currently the second largest MA payer behind UnitedHealthcare. 

The Gist: In a move signaled earlier this month, Humana has chosen to double down on its more profitable MA business, rather than continuing to compete with other major payers in the shrinking employer-sponsored commercial market. Humana already offers MA plans in 89 percent of US counties, more than UnitedHealthcare, but its 2022 MA growth was only a third of United’s (250K new lives enrolled, versus 750K). 

This move allows Humana to devote more resources to fielding competitive MA plan offerings and integrating its growing portfolio of physician and postacute care assets. 

‘We’re going to come out of this winning:’ Northwell CEO on labor challenges and the system’s biggest growth area

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https://www.beckershospitalreview.com/hospital-management-administration/were-going-to-come-out-of-this-winning-ceo-michael-dowling-on-northwells-labor-challenges-growth-areas.html?utm_medium=email&utm_content=newsletter

New Hyde Park, N.Y.-based Northwell Health began 2023 with a low, but positive operating margin, but labor costs are expected to increase again this year on the back of recent union activity in the state. 

To offset such increases that were not anticipated in the 2023 budget, Northwell is evaluating opportunities to reduce expenses and increase revenue across the health system, which includes 21 hospitals and about 83,000 employees.

Michael Dowling, CEO of Northwell, spoke to Becker’s Hospital Review about the health system’s biggest challenge this year, how it approaches cost-cutting and why outpatient care is its biggest growth area.

Editor’s note: Responses are lightly edited for length and clarity.

Question: Many health systems saw margins dip last year amid rising inflation, increased labor costs and declining patient volumes. How have you led Northwell through the challenges of last year? 

Michael Dowling: We ended 2022 with a low, but positive margin. We’ve been coming back from COVID quite successfully, and we’re back pretty much in all areas to where we were prior to the pandemic. Volumes have returned and we’re very busy. We came into 2023 with a positive budget and a positive margin. We anticipate that you’re always going to have challenges and disturbances, but it’s important to stay focused and deal with it. We have a very detailed strategic plan, which outlines our various goals, and we stick to it. 

Q: What is your top priority today?

MD: The biggest issue for us today is labor costs. We have lots of union activity in New York at the moment. There were various nurse strikes in New York City at the beginning of the year. None of our hospitals were involved in those deliberations, but some of those hospitals agreed to contracts that have increases that were not anticipated in anybody’s 2023 budget. That’s going to have an effect on us. We have negotiations ongoing with the nurses’ union, and have 10 unions overall. About 90 percent of Northwell’s facilities have unions, so the bottom line is we are going to have expenses as a result of these contracts that were not anticipated in the budget. I don’t know the final number on these contracts yet, but it’s definitely going to be more than what we anticipated. 

The unions in New York get a lot of government support and have become very empowered and quite aggressive. The bottom line is there’s more expense than we anticipated in our budget, so we need to figure out how to address that. We’re looking at everything across our health system to find expense reductions or revenue enhancements to be able to make up for the increased labor costs and be optimistic about ending the year with a positive margin. But we’re in a good place and are not like some other health systems that are struggling financially. 

Q: Where are the biggest opportunities to reduce expenses or increase revenue to offset the increased labor costs?

MD: It’s a combination of a lot of things. We have a detailed capital plan that we may slow down. We hire about 300 people a week, so maybe we’ll target that hiring into specific areas and not be as broad based as we thought we could be. We will examine if we have specific programs or initiatives we can curtail without doing any damage to our core mission. It will end up being a portfolio of items; it won’t be one big thing. On the revenue side, we’re working very hard to increase our neurosurgery, cardiac, cancer and orthopedic businesses. Over the next couple of months, all of those things will be taken into consideration. The bottom line is we are going to come out of this winning.

Q: Looking three or four years down the line, where do you see the biggest growth opportunities for Northwell?

MD: Our biggest growth is in outpatient care. A lot of surgeries are moving outpatient, so we have to get ahead of that. Some think we are only a hospital system, but only about 46 percent of our business is from our hospital sector today. Home care is going to grow phenomenally, especially given the new technology that’s available. Digital health will also dramatically expand. 

We’re also looking at expanding into new geographic areas and markets. It’s about positioning your offerings in places close to where people live, so you reduce the inconvenience of people having to travel long distances for care when it should be available to them closer to home. When you do that, you increase market share. We’re constantly increasing our market share by being very aggressive about going to where the customer is and providing the highest quality care that we can. Part of that is also being able to recruit top-line, quality physicians. When you do that, you attract new business because you have competencies that you didn’t have before. It’s a combination of all of these things, but there’s certainly no limit to the opportunities in front of us. We’re not in a world of challenges; we’re in a world of opportunity. The question is are we aggressive enough and do we have enough tolerance for some risk? We need to be as aggressive as we possibly can to take advantage of some of those opportunities. 

Q: What is the biggest challenge on the horizon for Northwell?

MD: The biggest challenge is the huge growth in government payer business — Medicare and Medicaid. The problem with Medicaid — especially in a union environment — is it doesn’t cover your costs. The government is a big part of a potential future issue there. By increasing Medicaid, the more of your business becomes Medicaid and the worse you end up doing, unless you can increase your commercial payer business to continue to cross-subsidize. We also have a lot of union negotiations over the next couple of months, which will put a strain on our 2023 budget, but we will resolve it.

Q: How do you see hospitals and health systems evolving as CMS, commercial payers and patients continue to push more services to outpatient settings, where they can arguably be performed at a higher quality and lower cost?

MD: I think it’s going to continue to grow. For example, Northwell has 23 hospitals — 21 of which it owns — yet it has 890 outpatient facilities. We’ve been ahead of this curve a long time. Our primary expansion is in ambulatory care, not in-hospital care. Like I said, only 46 percent of Northwell’s total business is its hospital business. If you’re relying on the hospital to be the core provider of the future, you’re going to lose. You’ve got to take a little bit of a hit by going out and expanding your ambulatory presence. But the more you expand ambulatory and grow in the right locations, the more you increase market share, which brings more of the necessary inpatient care back to your hospitals. Our hospitals are growing and getting busier in addition to our outpatient centers because we are growing market share. If we enter a new community and see 100 people, five of them will need to be hospitalized. That’s a new market. Ambulatory cannot be disassociated from its connection to the inpatient market. 

Q: Many financial experts are projecting a recession this year. How might that affect hospitals and health systems, and how can they best prepare? 

MD: Even if we do have a recession, it doesn’t mean that people don’t get sick. In fact, people’s problems increase. Our business does not slow down if we have a recession; our business will probably increase. On the revenue side, it won’t necessarily affect our government reimbursement, which we don’t do well on anyway. The things you worry about during a recession is if employers give up the coverage of their staff. Then those employees with no insurance may go on a state Medicaid program, and that might affect hospitals. 

In the healthcare sector, even in a recession, the need for hospital services actually increases. No recession could be as bad as what we experienced during COVID, yet we managed it. We had a problem that we didn’t even understand, and we worked through it. I think healthcare deserves an extraordinary credit for what was done during COVID. If there is a recession, we will deal with it. It’s just one of those things that happens, and we will respond to it in as comprehensive a way as we can. I can’t control it, but I can control our response. Leadership to me is about having a positive disposition; basically saying that whatever happens to you, you’re going to win. 

The shrinking book of “profitable” health system business 

Posted on by • Posted in Board, Business Case, Business Model, Business Transformations, Health System, Hospital, Hospital Industry, Leadership, Leadership Vision, Operating Margin, Operating Metrics, Operating Model, Operating Performance, Service Line Profitability, Service Line Rationalization, Strategic Change, Strategic Imperative, Strategic Issue, Strategic Leadership, Strategy • Leave a comment

https://mailchi.mp/89b749fe24b8/the-weekly-gist-february-17-2023?e=d1e747d2d8

This week, a health system CFO referenced the thoughts we shared last week about many hospitals rethinking physician employment models, and looking to pull back on employing more doctors, given current financial challenges. He said, “We’ve employed more and more doctors in the hope that we’re building a group that will allow us to pivot to total cost management.

But we can’t get risk, so we’ve justified the ‘losses’ on physician practices by thinking we’re making it up with the downstream volume the medical group delivers.

But the reality now is that we’re losing money on most of that downstream business. If we just keep adding doctors that refer us services that don’t make a margin, it’s not helping us.” 


While his comment has myriad implications for the physician organization, it also highlights a broader challenge we’ve heard from many health system executives: a smaller and smaller portion of the business is responsible for the overall system margin.

While the services that comprise the still-profitable book vary by organization (NICU, cardiac procedures, some cancer management, complex orthopedics, and neurosurgery are often noted), executives have been surprised how quickly some highly profitable service lines have shifted. One executive shared, “Orthopedics used to be our most profitable service line. But with rising labor costs and most of the commercial surgeries shifting outpatient, we’re losing money on at least half of it.”

These conversations highlight the flaws in the current cross-subsidy based business model. Rising costs, new competitors, and a challenging contracting environment have accelerated the need to find new and sustainable models to deliver care, plan for growth and footprint—and find a way to get paid that aligns with that future vision.

Has the backlash against physician employment begun?

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https://mailchi.mp/d62b14db92fb/the-weekly-gist-february-10-2023?e=d1e747d2d8

Given the economic situation most hospitals face today, it was only a matter of time before we started to hear comments like we heard recently from a system CEO. 

“We’ve got to pump the brakes on physician employment this year,” she said. “This arms race with Optum and PE firms has gotten out of control, and we’re looking at almost $300K per year of loss per employed doc.”

 Of course, that system (like most) has been calling that loss a “subsidy” or an “investment” for the past several years, justified by the ability to pursue an integrated model of care and to grow the overall system book of business.

But with non-hospital competitors unfettered by the requirement to pay “fair market value” for physicians, the bidding war for doctors has become unsustainable for many hospitals. Around half of physicians are now employed by hospitals, with many more employed in other corporate settings.

There’s a growing sense that the pendulum has swung too far in the direction of employment, and now the phrase “stopping the bleed”—commonplace in the post-PhyCor days of the early 2000s—has begun to ring out again.
 
One challenge: finding ways to talk openly about “pumping the brakes” with the board, given that most systems have key physician stakeholders as part of their governance structure. Twice in the last month we’ve had CEOs ask us about reconfiguring their boards so that there are fewer doctors involved in governance—a sharp about-face from the “integration” narrative of just a few years ago.

It’s a tricky balance to strike. We recently heard a fascinating statistic that we’re working to verify: a third of all hospital CEO turnover in the last year was driven by votes of no-confidence by the medical staff. True or not, there’s no doubt that running afoul of physicians can be a career-limiting move for hospital executives, so if we’re about to enter an era of dialing back physician employment strategies, it’ll be fascinating to see how the conversations unfold. We’ll continue to keep an eye on this shift in direction and would love to know what you’re hearing as well, and to discuss how we might be of assistance in navigating what are sure to be a series of difficult choices.

Where CEOs need to focus in 2023—and beyond

Posted on by • Posted in Affordability, Aging Population, Behavioral Health Infrastructure, Business Model, Business Transformations, CEO, Challenge, Change Management, Change Mindset, Chaos, Competition, Costly Specialty Therapeutics, Existential Opportunity, First Mover Advantage, Focus, Growing Senior Population, High Cost Therapies, Leadership Vision, Opportunity, Outcomes, Outcomes Appropriate, Restructure, Strategic Attention, Strategic Change, Strategic Leadership, Strategy, Unmanaged Behavioral Needs • Leave a comment
https://www.advisory.com/daily-briefing/2023/02/02/radio-advisory-146?utm_source=member_db&utm_medium=email&utm_campaign=2023feb02&utm_content=member_headline_finalb_infogram_x_x_x&elq_cid=4838956&

Radio Advisory’s Rachel Woods sat down with Advisory Board‘s Aaron Mauck and Natalie Trebes to talk about where leaders need to focus their attention on longer-term industry challenges—like growing competition, behavioral health infrastructure, and finding success in value-based care.

Read a lightly edited excerpt from the interview below and download the episode for the full conversation.https://player.fireside.fm/v2/HO0EUJAe+VhuSvHlL?theme=dark

Rachel Woods: So I’ve been thinking about the last conversation that we had about what executives need to know to be prepared to be successful in 2023, and I feel like my big takeaway is that the present feels aggressively urgent. The business climate today is extraordinarily tough, there are all these disruptive forces that are changing the competitive landscape, right? That’s where we focused most of our last conversation.

But we also agreed that those were still kind of near-term problems. My question is why, if things feel like they are in such a crisis, do we need to also focus our attention on longer term challenges?

Aaron Mauck: It’s pretty clear that the business environment really isn’t sustainable as it currently stands, and there’s a tendency, of course, for all businesses to focus on the urgent and important items at the expense of the non-urgent and important items. And we have a lot of non-urgent important things that are coming on the horizon that we have to address.

Obviously, you think about the aging population. We have the baby boom reaching an age where they’re going to have multiple care needs that have to be addressed that constitute pretty significant challenges. That aging population is a central concern for all of us.

Costly specialty therapeutics that are coming down the pipeline that are going to yield great results for certain patient segments, but are going to be very expensive. Unmanaged behavioral needs, disagreements around appropriate spending. So we have lots of challenges, myriad of challenges we’re going to have to address simultaneously.

Natalie Trebes: Yeah, that’s right. And I would add that all of those things are at threshold moments where they are pivoting into becoming our real big problems that are very soon going to be the near term problems. And the environment that we talked about last time, it’s competitive chaos that’s happening right now, is actually the perfect time to be making some changes because all the challenges we’re going to talk about require really significant restructuring of how we do business. That’s hard to do when things are stable.

Woods: Yes. But I still think you’re going to get some people who disagree. And let me tell you why. I think there’s two reasons why people are going to disagree. The first reason is, again, they are dealing with not just one massive fire in front of them, but what feels like countless massive fires in front of them that’s just demanding all of their strategic attention. That was the first thing you said every executive needs to know going into this year, and maybe not know, but accept, if I’m thinking about the stages of grief.

But the second reason why I think people are going to push back is the laundry list of things that Aaron just spoke of are areas where, I’m not saying the healthcare industry shouldn’t be focused on them, but we haven’t actually made meaningful progress so far.

Is 2023 actually the year where we should start chipping away at some of those huge industry challenges? That’s where I think you’re going to get disagreement. What do you say to that?

Trebes: I think that’s fair. I think it’s partly that we have to start transforming today and organizations are going to diverge from here in terms of how they are affected. So far, we’ve been really kind of sharing the pain of a lot of these challenges, it’s bits and pieces here. We’re all having to eat a little slice of this.

I think different organizations right now, if they are careful about understanding their vulnerabilities and thinking about where they’re exposed, are going to be setting themselves up to pass along some of that to other organizations. And so this is the moment to really understand how do we collectively want to address these challenges rather than continue to try to touch as little of it as we possibly can and scrape by?

Woods: That’s interesting because it’s also probably not just preparing for where you have vulnerabilities that are going to be exposed sooner rather than later, but also where might you have a first mover advantage? That gets back to what you were talking about when it comes to the kind of competitive landscape, and there’s probably people who can use these as an opportunity for the future.

Mauck: Crises are always opportunities and even for those players across the healthcare system who have really felt like they’re boxers in the later rounds covering up under a lot of blows, there’s opportunities for them to come back and devise strategies for the long term that really yield growth.

We shouldn’t treat this as a time just of contraction. There are major opportunities even for some of the traditional incumbents if they’re approaching these challenges in the right fashion. When we think about that in terms of things like labor or care delivery models, there’s huge opportunities and when I talk with C-suites from across the sector, they recognize those opportunities. They’re thinking in the long term, they need to think in the long term if they’re going to sustain themselves. It is a time of existential crisis, but also a time for existential opportunity.

Trebes: Yeah, let’s be real, there is a big risk of being a first mover, but there is a really big opportunity in being on the forefront of designing the infrastructure and setting the table of where we want to go and designing this to work for you. Because changes have to happen, you really want to be involved in that kind of decision making.

Woods: And in the vein of acceptance, we should all accept that this isn’t going to be easy. The challenges that I think we want to focus on for the rest of this conversation are challenges that up to this point have seemed unsolvable. What are the specific areas that you think should really demand executive attention in 2023?

Trebes: Well, I think they break into a few different categories. We are having real debates about how do we decide what are appropriate outcomes in healthcare? And so the concept of measuring value and paying for value. We have to make some decisions about what trade-offs we want to make there, and how do we build in health equity into our business model and do we want to make that a reality for everyone?

Another category is all of the expensive care that we have to figure out how to deliver and finance over the coming years. So we’re talking about the already inadequate behavioral health infrastructure that’s seen a huge influx in demand.

We’re talking about what Aaron mentioned, the growing senior population, especially with boomers getting older and requiring a lot more care, and the pipeline of high-cost therapies. All of this is not what we are ready as the healthcare system as it exists today to manage appropriately in a financially sustainable way. And that’s going to be really hard for purchasers who are financing all of this.

Ketul J. Patel, Division President, Pacific Northwest; Chief Executive Officer, CommonSpirit Health; Virginia Mason Franciscan Health

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https://www.beckershospitalreview.com/podcasts/podcasts-beckers-hospital-review/ketul-j-patel-division-president-pacific-northwest-chief-executive-officer-commonspirit-health-virginia-mason-franciscan-health-93490853.html?utm_source=email&utm_content=odysseypromo&oly_enc_id=1727F7626990D7P

There is no shortage of challenges to confront in healthcare today, from workforce shortages and burnout to innovation and health equity (and so much more). We’re committed to giving industry leaders a platform for sharing best practices and exchanging ideas that can improve care, operations and patient outcomes.


Check out this podcast interview with Ketul J. Patel, CEO at Virginia Mason Franciscan Health and division president, Pacific Northwest at CommonSpirit Health, for his insights on where healthcare is headed in the future.

In this episode, we are joined by Ketul J. Patel, Division President, Pacific Northwest; Chief Executive Officer, CommonSpirit Health; Virginia Mason Franciscan Health, to discuss his background & what led him to executive healthcare leadership, challenges surrounding workforce shortages, the importance of having a strong workplace culture, and more.

Is Magnet status beginning to lose its attraction?

Posted on by • Posted in American Nurses Association, Cost Management, Cost Reduction, Health System, Hospital, Hospital Industry, Magnet Status, Nurse Retention, Nurse Staffing, Nurses, Nurses Shortage, Nurses Union, Strategy • Leave a comment

https://mailchi.mp/8f3f698b8612/the-weekly-gist-january-27-2023?e=d1e747d2d8

As hospitals and health system leaders continue to grapple with persistently high nursing vacancy rates and severe staffing challenges, and face growing pressure to cut costs, we’re beginning to hear serious—if paradoxical—consideration being given to sharpening the axe, with an eye on a long-standing sacred cow: “Magnet” status.

For years, leading systems have invested significant time and resources to earn Magnet status, a designation of nursing quality granted by the American Nursing Association through its American Nurses’ Credentialing Center. Applying for—and then renewing—the designation can cost millions of dollars and involve significant process changes and staff time. In return, participants can market themselves as “Magnet hospitals”, presumably garnering additional patient business and giving them a leg up in recruiting high-quality nurses. At a time of severe nursing shortage, you might expect interest in earning or maintaining Magnet status to be spiking.
 
But that’s not what we’re hearing. “It’s just too expensive,” shared one system CEO recently. “We haven’t really seen it move the needle on volume, and our Magnet-designated facilities are just as stretched as the non-Magnet ones, with equally low morale.” Plus, at a time when the ability to pursue flexible staffing models is at a premium, keeping up with Magnet standards is increasingly handcuffing some hospitals looking to evaluate alternative staffing solutions.

“We can achieve all of the benefits of Magnet without having to jump through their hoops on process and data collection,” a system chief nursing officer told us. “We’re working on our own, internally-branded alternative to Magnet—something our own staff comes up with, rather than something artificially imposed from an outside organization.” 

Ironically, this may be another area—like the battle against contract labor—in which systems now find themselves aligned with nursing unions, which have long opposed the Magnet program as just a marketing gimmick. There’s no question that programs like Magnet have helped increase the visibility of nursing as a driver of quality care. But given the current economic environment, it’ll be interesting to see how much hospitals are willing to continue to invest to maintain the designation.

16 Things CEOs Need to Know in 2023

Posted on by • Posted in Behavioral Health, CEO, Clinical Workforce Shortage, Consumer-Centric, Consumerism, Demand, Financial Goals, Financial Performance, Health Insurance Coverage Adequacy, Health System, High Cost Therapies, Home-Based Care, Hospital, Hospital Industry, Integrated Delivery System, Integrated Physician Enterprise, Risk-Based Compensation, Self Insured Employers, Senior Care, Strategy, Telemedicine, Telemedicine Strategy, Vertical Integration, Vertical Mergers • Leave a comment

https://www.advisory.com/-/media/project/advisoryboard/abresearch/brand-campaigns/soi/wf8632394-ab-16-things-ceos-need-to-know.pdf#page=38

Understand the health care industry’s most urgent challenges—and greatest opportunities.

The health care industry is facing an increasingly tough business climate dominated by increasing costs and prices, tightening margins and capital, staffing upheaval, and state-level policymaking. These urgent, disruptive market forces mean that leaders must navigate an unusually high number of short-term crises.

But these near-term challenges also offer significant opportunities. The strategic choices health care leaders make now will have an outsized impact—positive or negative—on their organization’s long-term goals, as well as the equitability, sustainability, and affordability of the industry as a whole.

This briefing examines the biggest market forces to watch, the key strategic decisions that health care organizations must make to influence how the industry operates, and the emerging disruptions that will challenge the traditional structures of the entire industry.

Preview the insights below and download the full executive briefing (using the link above) now to learn the top 16 insights about the state of the health care industry today.

Preview the insights

Part 1 | Today’s market environment includes an overwhelming deluge of crises—and they all command strategic attention

Insight #1

The converging financial pressures of elevated input costs, a volatile macroeconomic climate, and the delayed impact of inflation on health care prices are exposing the entire industry to even greater scrutiny over affordability. Keep reading on pg. 6

Insight #2

The clinical workforce shortage is not temporary. It’s been building to a structural breaking point for years. Keep reading on pg. 8

Insight #3

Demand for health care services is growing more varied and complex—and pressuring the limited capacity of the health care industry when its bandwidth is most depleted. Keep reading on pg. 10

Insight #4

Insurance coverage shifted dramatically to publicly funded managed care. But Medicaid enrollment is poised to disperse unevenly after the public health emergency expires, while Medicare Advantage will grow (and consolidate). Keep reading on pg. 12

Part II | Competition for strategic assets continues at a rapid pace—influencing how and where patient care is delivered.

Insight #5

The current crisis conditions of hospital systems mask deeper vulnerabilities: rapidly eroding power to control procedural volumes and uncertainty around strategic acquisition and consolidation. Keep reading on pg. 15

Insight #6

Health care giants—especially national insurers, retailers, and big tech entrants—are building vertical ecosystems (and driving an asset-buying frenzy in the process). Keep reading on pg. 17

Insight #7

As employment options expand, physicians will determine which owners and partners benefit from their talent, clinical influence, and strategic capabilities—but only if these organizations can create an integrated physician enterprise. Keep reading on pg. 19

Insight #8

Broader, sustainable shifts to home-based care will require most care delivery organizations to focus on scaling select services. Keep reading on pg. 21

Insight #9

A flood of investment has expanded telehealth technology and changed what interactions with patients are possible. This has opened up new capabilities for coordinating care management or competing for consumer attention. Keep reading on pg. 23

Insight #10

Health care organizations are harnessing data and incentives to curate consumers choices—at both the service-specific and ecosystem-wide levels. Keep reading on pg. 25

Part III | Emerging structural disruptions require leaders to reckon with impacts to future business sustainability. 

Insight #11

For value-based care to succeed outside of public programs, commercial plans and providers must coalesce around a sustainable risk-based payment approach that meets employers’ experience and cost needs. Keep reading on pg. 28

Insight #12

Industry pioneers are taking steps to integrate health equity into quality metrics. This could transform the health care business model, or it could relegate equity initiatives to just another target on a dashboard. Keep reading on pg. 30

Insight #13

Unprecedented behavioral health needs are hitting an already fragmented, marginalized care infrastructure. Leaders across all sectors will need to make difficult compromises to treat and pay for behavioral health like we do other complex, chronic conditions. Keep reading on pg. 32

Insight #14

As the population ages, the fragile patchwork of government payers, unpaid caregivers, and strained nursing homes is ill-equipped to provide sustainable, equitable senior care. This is putting pressure on Medicare Advantage plans to ultimately deliver results. Keep reading on pg. 34

Insight #15

The enormous pipeline of specialized high-cost therapies in development will see limited clinical use unless the entire industry prepares for paradigm shifts in evidence evaluation, utilization management, and financing. Keep reading on pg. 36

Insight #16

Self-funded employers, who are now liable for paying “reasonable” amounts, may contest the standard business practices of brokers and plans to avoid complex legal battles with poor optics. Keep reading on pg. 38