Category Archives: Transformation

AI in medicine: 3 easy questions to separate hype from reality

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https://www.linkedin.com/pulse/ai-medicine-3-easy-questions-separate-hype-from-robert-pearl-m-d–ctznc/

Artificial intelligence has long been heralded as a transformative force in medicine. Yet, until recently, its potential has remained largely unfulfilled.

Consider the story of MYCIN, a “rule-based” AI system developed in the 1970s at Stanford University to help diagnose infections and recommend antibiotics. Though MYCIN showed early promise, it relied on rigid, predetermined rules and lacked the flexibility to handle unexpected or complex cases that arise in real-world medicine. Ultimately, the technology of the time couldn’t match the nuanced judgment of skilled clinicians, and MYCIN never achieved widespread clinical use.

Fast forward to 2011, when IBM’s Watson gained global notoriety by besting renowned Jeopardy! champions Ken Jennings and Brad Rutter. Soon after, IBM applied Watson’s vast computing power to healthcare, envisioning it as a gamechanger in oncology. Tasked with synthesizing data from medical literature and patient records at Memorial Sloan Kettering, Watson aimed to recommend tailored cancer treatments.

However, the AI struggled to provide reliable, relevant recommendations—not because of any computational shortcoming but due to inconsistent, often incomplete, data sources. These included imprecise electronic health record entries and research articles that leaned too heavily toward favorable conclusions, failing to hold up in real-world clinical settings. IBM shut down the project in 2020.

Today, healthcare and tech leaders question whether the latest wave of AI tools—including much-heralded generative artificial intelligence models—will deliver on their promise in medicine or become footnotes in history like MYCIN and Watson.

Anthropic CEO Dario Amodei is among the AI optimists. Last month, in a sprawling 15,000-word essay, he predicted that AI would soon reshape humanity’s future. He claimed that by 2026, AI tools (presumably including Anthropic’s Claude) will become “smarter than a Nobel Prize winner.”

Specific to human health, Amodei touted AI’s ability to eliminate infectious diseases, prevent genetic disorders and double life expectancy to 150 years—all within the next decade.

While I admire parts of Amodei’s vision, my technological and medical background makes me question some of his most ambitious predictions.

When people ask me how to separate AI hype from reality in medicine, I suggest starting with three critical questions:

Question 1: Will the AI solution speed up a process or task that humans could eventually complete on their own?

Sometimes, scientists have the knowledge and expertise to solve complex medical problems but are limited by time and cost. In these situations, AI tools can deliver remarkable breakthroughs.

Consider AlphaFold2, a system developed by Google DeepMind to predict how proteins fold into their three-dimensional structures. For decades, researchers struggled to map these large, intricate molecules—the exact shape of each protein requiring years and millions of dollars to decipher. Yet, understanding these structures is invaluable, as they reveal how proteins function, interact and contribute to diseases.

With deep learning and massive datasets, AlphaFold2 accomplished in days what would have taken labs decades, predicting hundreds of proteins’ structures. Within four years, it mapped all known proteins—a feat that won DeepMind researchers a Nobel Prize in Chemistry and is now accelerating drug discovery and medical research.

Another example is a collaborative project between the University of Pittsburgh and Carnegie Mellon, where AI analyzed electronic health records to identify adverse drug interactions. Traditionally, this process took months of manual review to uncover just a few risks. With AI, researchers were able to examine thousands of medications in days, drastically improving speed and accuracy.

These achievements show that when science has a clear path but lacks the speed, tools and scale for execution, AI can bridge the gap. In fact, if today’s generative AI technology existed in the 1990s, ChatGPT estimates it could have sequenced the entire human genome in less than a year—a project that originally took 13 years and $2.7 billion.

Applying this criterion to Amodei’s assertion that AI will soon eliminate most infectious diseases, I believe this goal is realistic. Today’s AI technology already analyzes vast amounts of data on drug efficacy and side effects, discovering new uses for existing medications. AI is also proving effective in guiding the development of new drugs and may help address the growing issue of antibiotic resistance. I agree with Amodei that AI will be able to accomplish in a few years what otherwise would have taken scientists decades, offering fresh hope in the fight against human pathogens.

Question 2: Does the complexity of human genetics make the problem unsolvable, no matter how smart the technology?

Imagine searching for a needle in a giant haystack. When a single answer is hidden within mountains of data, AI can find it much faster than humans alone. But if that “needle” is metallic dust, scattered across multiple haystacks, the challenge becomes insurmountable, even for AI.

This analogy captures why certain medical problems remain beyond AI’s reach. In his essay, Amodei predicts that generative AI will eliminate most genetic disorders, cure cancer and prevent Alzheimer’s within a decade.

While AI will undoubtedly deepen our understanding of the human genome, many of the diseases Amodei highlights as curable are “multifactorial,” meaning they result from the combined impact of dozens of genes, plus environmental and lifestyle factors. To better understand why this complexity limits AI’s reach, let’s first examine simpler, single-gene disorders, where the potential for AI-driven treatment is more promising.

For certain genetic disorders, like BRCA-linked cancers or sickle cell disease that result from a single-gene abnormality, AI can play a valuable role by helping researchers identify and potentially use CRISPR, an advanced gene-editing tool, to directly edit these mutations to reduce disease risk.

Yet even with single-gene conditions, treatment is complex. CRISPR-based therapies for sickle cell, for example, require harvesting stem cells, editing them in a lab and reinfusing them after risky conditioning treatments that pose significant health threats to patients.

Knowing this, it’s evident that the complications would only multiply when editing multifactorial congenital diseases like cleft lip and palate—or complex diseases that manifest later in life, including cardiovascular disease and cancer.

Put simply, editing dozens of genes simultaneously would introduce severe threats to health, most likely exceeding the benefits. Whereas generative AI’s capabilities are accelerating at an exponential rate, gene-editing technologies like CRISPR face strict limitations in human biology. Our bodies have intricate, interdependent functions. This means correcting multiple genetic issues in tandem would disrupt essential biological functions in unpredictable, probably fatal ways.

No matter how advanced an AI tool may become in identifying genetic patterns, inherent biological constraints mean that multifactorial diseases will remain unsolvable. In this respect, Amodei’s prediction about curing genetic diseases will prove only partially correct.

Question 3: Will the AI’s success depend on people changing their behaviors?

One of the greatest challenges for AI applications in medicine isn’t technological but psychological: it’s about navigating human behavior and our tendency toward illogical or biased decisions. While we might assume that people will do everything they can to prolong their lives, human emotions and habits tell a different story.

Consider the management of chronic diseases like hypertension and diabetes. In this battle, technology can be a strong ally. Advanced home monitoring and wearable devices currently track blood pressure, glucose and oxygen levels with impressive accuracy. Soon, AI systems will analyze these readings, recommend diet and exercise adjustments and alert patients and clinicians when medication changes are needed.

But even the most sophisticated AI tools can’t force patients to reliably follow medical advice—or ensure that doctors will respond to every alert.

Humans are flawed, forgetful and fallible. Patients skip doses, ignore dietary recommendations and abandon exercise goals. On the clinician side, busy schedules, burnout and competing priorities often lead to missed opportunities for timely interventions. These behavioral factors add layers of unpredictability and unresponsiveness that even the most accurate AI systems cannot overcome.

And in addition to behavioral challenges, there are biological issues that limit the human lifespan. As we grow older, the protective caps on our chromosomes wear down, causing cells to stop functioning. Our cells’ energy sources, called mitochondria, gradually fail, weakening our bodies until vital organs cease to function. Short of replacing every cell and tissue in our bodies, our organs will eventually give out. And even if generative AI could tell us exactly what we needed to do to prevent these failings, it is unlikely people would consistently follow the recommendations.

For these reasons, Amodei’s boldest prediction—that longevity will double to 150 years within a decade—won’t happen. AI offers remarkable tools and intelligence. It will expand our knowledge far beyond anything we can imagine today. But ultimately, it cannot override the natural and complex limitations of human life: aging parts and illogical behaviors.

In the end, you should embrace AI promises when they build on scientific research. But when they violate biological or psychological principles, don’t believe the hype.

The Four Questions Healthcare Boards must Answer

Posted on by • Posted in Artificial Intelligence, Board Effectiveness, Board Purpose, Disruption, Disruptive Technology, Future State, Innovation, Leadership Vision, Transformation, Transformation Fundamental, Transformation Strategy, Transformation Sustained, Transformational Change, Transformative Forces • Leave a comment
The Four Questions Healthcare Boards must Answer

In 63 days, Americans will know the composition of the 119th Congress and the new occupants of the White House and 11 Governor’s mansions. We’ll learn results of referenda in 10 states about abortion rights (AZ, CO, FL, MD, MO, MT, NE, NV, NY, SD) and see how insurance coverage for infertility (IVF therapy) fares as Californians vote on SB 729. But what we will not learn is the future of the U.S. health system at a critical time of uncertainty.

In 6 years, every baby boomer will be 65 years of age or older. In the next 20 years, the senior population will be 22% of the population–up from 18% today. That’s over 83 million who’ll hit the health system vis a vis Medicare while it is still digesting the tsunami of obesity, a scarcity of workers and unprecedented discontent:

  • The majority of voters is dissatisfied with the status quo. 69% think the system is fundamentally flawed and in need of major change vs. 7% who think otherwise. 60% believe it puts its profits above patient care vs. 13% who disagree.
  • Employers are fed up: Facing projected cost increases of 9% for employee coverage in 2025, they now reject industry claims of austerity when earnings reports and executive compensation indicate otherwise. They’re poised to push back harder than ever.
  • Congress is increasingly antagonistic: A bipartisan coalition in Congress is pushing populist reforms unwelcome by many industry insiders i.e. price transparency for hospitals, price controls for prescription drugs, limits on private equity ownership, constraint on hospital, insurer and physician consolidation, restrictions on tax exemptions of NFP hospitals, site neutral payment policies and many more.

Fanning these flames, media characterizations of targeted healthcare companies as price gouging villains led by highly-paid CEOs is mounting: last week, it was Acadia Health’s turn courtesy of the New York Times’ investigators.

Navigating uncertainty is tough for industries like healthcare where demand s growing, technologies are disrupting how and where services are provided and by whom, and pricing and affordability are hot button issues.  And it’s too big to hide: at $5.049 trillion, it represents 17.6% of the U.S. GDP today increasing to 19.7% by 2032. Growing concern about national debt puts healthcare in the crosshairs of policymaker attention:

Per the Committee for a Responsible Federal Budget: “In the latest Congressional Budget Office (CBO) baseline, nominal spending is projected to grow from $6.8 trillion in Fiscal Year (FY) 2024 to $10.3 trillion in 2034. About 87% of this increase is due to three parts of the federal budget: Social Security, federal health care programs, and interest payments on the debt.”

In response, Boards in many healthcare organizations are hearing about the imperative for “transformational change” to embrace artificial intelligence, whole person health, digitization and more. They’re also learning about ways to cut their operating costs and squeeze out operating margins. Bold, long-term strategy is talked about, but most default to less risky, short-term strategies compatible with current operating plans and their leaders’ compensation packages. Thus, “transformational change” takes a back seat to survival or pragmatism for most.

For Boards of U.S. healthcare organizations, the imperative for transformational change is urgent: the future of the U.S. system is not a repeat of its past. But most Boards fail to analyze the future and construct future-state scenarios systematically. Lessons from other industries are instructive.

  • Transformational change in mission critical industries occurs over a span of 20-25 years. It starts with discontent with the status quo, then technologies and data that affirm plausible alternatives and private capital that fund scalable alternatives. It’s not overnight.
  • Transformational change is not paralyzed by regulatory hurdles. Transformers seek forgiveness, not permission while working to change the regulatory landscape. Advocacy is a critical function in transformer organizations.
  • Transformation is welcomed by consumers. Recognition of improved value by end-users—individual consumers—is what institutionalizes transformational success. Transformed industries define success in terms of the specific, transparent and understandable results of their work.

Per McKinsey, only one in 8 organizations is successful in fully implementing transformational change completely but the reward is significant: transformers outperform their competition three-to-one on measures of growth and effectiveness.

I am heading to Colorado Springs this weekend for the Governance Institute. There, I will offer Board leaders four basic questions.

  • Is the future of the U.S. health system a repeat of the past or something else?
  • How will its structure, roles and responsibilities change?
  • How will affordability, quality, innovation and value be defined and validated?
  • How will it be funded?

Answers to these require thoughtful discussion. They require independent judgement. They require insight from organizations outside healthcare whose experiences are instructive. They require fresh thinking.

Until and unless healthcare leaders recognize the imperative for transformational change, the system will calcify its victim-mindset and each sector will fend for itself with diminishing results. No sector—hospitals, insurers, drug companies, physicians—has all the answers and every sector faces enormous headwinds. Perhaps it’s time for a cross-sector coalition to step up with transformational change as the goal and the public’s well-being the moral compass.

PS: Last week, I caught up with Drs. Steve and Pat Gabbe in Columbus, Ohio. Having served alongside them at Vanderbilt and now as an observer of their work at Ohio State, I am reminded of the goodness and integrity of those in healthcare who devote their lives to meaningful, worthwhile work. Steve “burns with a clear blue flame” as a clinician, mentor and educator. Pat is the curator of a program, Moms2B, that seeks to alleviate Black-White disparities in infant mortality and maternal child health in Ohio. They’re great people who see purpose in their calling; they’re what make this industry worth fixing!

Has U.S. Healthcare reached its Tipping Point?

Posted on by • Posted in Affordability, Cost Management, Dept of Justice (DOJ), Disruption, Disruptive Technology, Federal Trade Commission, Federal Trade Commission (FTC), Health Insurance Industry, Health Policy, Health System, Healthcare Industry, Healthcare Reform, High Drug Prices, Inflation, Innovation, Innovative Care Models, Integrated Delivery System, Meaningful, Price Transparency, Private Equity, Tipping Point, Transformation, Transformational Change • Leave a comment
Has U.S. Healthcare reached its Tipping Point?

Last week was significant for healthcare:

  • Tuesday, the, FTC, and DOJ announced creation of a task force focused on tackling “unfair and illegal pricing” in healthcare. The same day, HHS joined FTC and DOJ regulators in launching an investigation with the DOJ and FTC probing private equity’ investments in healthcare expressing concern these deals may generate profits for corporate investors at the expense of patients’ health, workers’ safety and affordable care.
  • Thursday’s State of the Union address by President Biden (SOTU) and the Republican response by Alabama Senator Katey Britt put the spotlight on women’s reproductive health, drug prices and healthcare affordability.
  • Friday, the Senate passed a $468 billion spending bill (75-22) that had passed in the House Wednesday (339-85) averting a government shutdown. The bill postpones an $8 billion reduction in Medicaid disproportionate share hospital payments for a year, allocates $4.27 billion to federally qualified health centers through the end of the year and rolls back a significant portion of a Medicare physician pay cut that kicked in on Jan. 1. Next, Congress must pass appropriations for HHS and other agencies before the March 22 shutdown.
  • And all week, the cyberattack on Optum’s Change Healthcare discovered February 21 hovered as hospitals, clinics, pharmacies and others scrambled to manage gaps in transaction processing. Notably, the American Hospital Association and others have amplified criticism of UnitedHealth Group’s handling of the disruption, having, bought Change for $13 billion in October, 2022 after a lengthy Department of Justice anti-trust review. This week, UHG indicates partial service of CH support will be restored. Stay tuned.

Just another week for healthcare: Congressional infighting about healthcare spending. Regulator announcements of new rules to stimulate competition and protect consumers in the healthcare market.  Lobbying by leading trade groups to protect funding and disable threats from rivals. And so on.

At the macro level, it’s understandable: healthcare is an attractive market, especially in its services sectors. Since the pandemic, prices for services (i.e. physicians, hospitals et al) have steadily increased and remain elevated despite the pressures of transparency mandates and insurer pushback. By contrast, prices for most products (drugs, disposables, technologies et al) have followed the broader market pricing trends where prices for some escalated fast and then dipped.

While some branded prescription medicines are exceptions, it is health services that have driven the majority of health cost inflation since the pandemic.

UnitedHealth Group’s financial success is illustrative: 

it’s big, high profile and vertically integrated across all major services sectors. In its year end 2023 financial report (January 12, 2024) it reported revenues of $371.6 Billion (up 15% Year-Over-Year), earnings from operations up 14%, cash flows from operations of $29.1 Billion (1.3x Net Income), medical care ratio at 83.2% up from 82% last year, net earnings of $23.86/share and adjusted net earnings of $25.12/share and guidance its 2024 revenues of $400-403 billion. They buy products using their scale and scope leverage to  pay less for services they don’t own less and products needed to support them. It’s a big business in a buyer’s market and that’s unsettling to many.

Big business is not new to healthcare:

it’s been dominant in every sector but of late more a focus of unflattering regulator and media attention. Coupled with growing public discontent about the system’s effectiveness and affordability, it seems it’s near a tipping point.

David Johnson, one of the most thoughtful analysts of the health industry, reminded his readers last week that the current state of affairs in U.S. healthcare is not new citing the January 1970 Fortune cover story “Our Ailing Medical System”

 “American medicine, the pride of the nation for many years, stands now on the brink of chaos. To be sure, our medical practitioners have their great moments of drama and triumph. But much of U.S. medical care, particularly the everyday business of preventing and treating routine illnesses, is inferior in quality, wastefully dispensed, and inequitably financed…

Whether poor or not, most Americans are badly served by the obsolete, overstrained medical system that has grown up around them helter-skelter. … The time has come for radical change.”

Johnson added: “The healthcare industry, however, cannot fight gravity forever. Consumerism, technological advances and pro-market regulatory reforms are so powerful and coming so fast that status-quo healthcare cannot forestall their ascendance. Properly harnessed, these disruptive forces have the collective power necessary for U.S. healthcare to finally achieve the 1970 Fortune magazine goal of delivering “good care to every American with little increase in cost.”

He’s right.

I believe the U.S. health system as we know it has reached its tipping point. The big-name organizations in every sector see it and have nominal contingency plans in place; the smaller players are buying time until the shoe drops. But I am worried.

I am worried the system’s future is in the hands of hyper-partisanship by both parties seeking political advantage in election cycles over meaningful creation of a health system that functions for the greater good.

I am worried that the industry’s aversion to price transparency, meaningful discussion about affordability and consistency in defining quality, safety and value will precipitate short-term gamesmanship for reputational advantage and nullify systemness and interoperability requisite to its transformation.

I am worried that understandably frustrated employers will drop employee health benefits to force the system to needed accountability.

I am worried that the growing armies of under-served and dissatisfied populations will revolt.

I am worried that its workforce is ill-prepared for a future that’s technology-enabled and consumer centric.

I am worried that the industry’s most prominent trade groups are concentrating more on “warfare” against their rivals and less about the long-term future of the system.

I am worried that transformational change is all talk.

It’s time to start an adult conversation about the future of the system. The starting point: acknowledging that it’s not about bad people; it’s about systemic flaws in its design and functioning. Fixing it requires balancing lag indicators about its use, costs and demand with assumptions about innovations that hold promise to shift its trajectory long-term. It requires employers to actively participate: in 2009-2010, Big Business mistakenly chose to sit out deliberations about the Affordable Care Act. And it requires independent, visionary facilitation free from bias and input beyond the DC talking heads that have dominated reform thought leadership for 6 decades.

Or, collectively, we can watch events like last week’s roll by and witness the emergence of a large public utility serving most and a smaller private option for those that afford it. Or something worse.

P.S. Today, thousands will make the pilgrimage to Orlando for HIMSS24 kicking off with a keynote by Robert Garrett, CEO of Hackensack Meridian Health tomorrow about ‘transformational change’ and closing Friday with a keynote by Nick Saban, legendary Alabama football coach on leadership. In between, the meeting’s 24 premier supporters and hundreds of exhibitors will push their latest solutions to prospects and customers keenly aware healthcare’s future is not a repeat of its past primarily due to technology. Information-driven healthcare is dependent on technologies that enable cost-effective, customized evidence-based care that’s readily accessible to individuals where and when they want it and with whom.

And many will be anticipating HCA Mission Health’s (Asheville NC) Plan of Action response due to CMS this Wednesday addressing deficiencies in 6 areas including CMS Deficiency 482.12 “which ensures that hospitals have a responsible governing body overseeing critical aspects of patient care and medical staff appointments.” Interest is high outside the region as the nation’s largest investor-owned system was put in “immediate jeopardy” of losing its Medicare participation status last year at Mission. FYI: HCA reported operating income of $7.7 billion (11.8% operating margin) on revenues of $65 billion in 2023.

General Catalyst to buy Summa Health

Posted on by • Posted in For-Profit, Health System, Integrated Delivery System, Market Consolidation, Market Trends, Medicare Advantage, Mergers & Acquisitions, Transformation, Transformation Strategy, Value-Based Healthcare • Leave a comment

https://mailchi.mp/cd8b8b492027/the-weekly-gist-january-26-2024?e=d1e747d2d8

Last week, venture capital firm General Catalyst announced its plan to acquire Summa Health, an Akron, OH-based integrated delivery system with three hospitals, a large medical group, a health plan, and an annual revenue of around $2B. The terms of the deal were not disclosed, though General Catalyst previously indicated it aimed to spend $1-3B to acquire a health system.

Pending regulatory approval, Summa will convert to a for-profit entity and become a fully owned subsidiary of General Catalyst’s recently launched Health Assurance Transformation Corporation (HATCo).

HATCo, under the leadership of former Intermountain Health CEO Marc Harrison, was founded with the intention of acquiring a health system to serve as a blueprint for General Catalyst’s vision of healthcare transformation.

The Gist: While there’s a dearth of evidence for what kind of health system makes a good venture capital investment, Summa’s concentrated footprint of integrated delivery assets, robust Medicare Advantage plan, and position in an aging, yet competitive, market certainly seem attractive given HATCo’s stated goals. 

If it closes, the partnership will provide Summa with an influx of capital and General Catalyst with a “proving ground” for both its vision of healthcare transformation and its portfolio of technology solutions. But while it’s one thing to get Summa’s board to sign on, General Catalyst will now have to reckon with other important stakeholders. 

Summa’s physicians will be the gatekeepers of change at the local level, and their buy-in will be required for any continued push toward value-based care or successful product roll-out. 

And, behind the scenes, General Catalyst will have to convince its investors that this longer-term play to rethink care delivery will offer financial returns worth the wait.

General Catalyst announces intent to buy a health system

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https://mailchi.mp/de5aeb581214/the-weekly-gist-october-13-2023?e=d1e747d2d8

On Sunday, venture capital (VC) firm General Catalyst unveiled the Health Assurance Transformation Corporation (HATCo), a new subsidiary company which aims to acquire a health system to serve as a blueprint for the VC firm’s vision of healthcare transformation. 

Sharing this news on the first day of the HLTH 2023 conference in Las Vegas, General Catalyst declined to comment on which health systems are targets, or how much it is willing to spend, but CEO Hemant Taneja suggested that investment returns would be evaluated on a longer timeline than the typical 10-year venture capital horizon. 

Dr. Marc Harrison, the former CEO of Intermountain Health who joined General Catalyst in 2022, has been tapped to lead HATCo. The new company will build on General Catalyst’s previously announced partnerships with health systems, including Intermountain, HCA Healthcare, and Universal Health Services, with the goal of connecting healthcare startups with health systems in order to test and scale their technologies.  

The Gist: While private equity firms have backed health systems before, a VC firm expressing interest in health system ownership is a surprising development. 

Even on a longer timeframe than most venture plays get, it’s difficult to imagine a health system ever delivering the outsized returns VC investors usually demand. It’s possible HATCo’s true value will come from scaling and selling the services of tech startups in General Catalyst’s portfolio after vetting them at their health system “proving ground”. 

HATCo’s more ambitious aim to align payers and providers in a pivot to value-based care is a familiar one, but the new venture will find itself up against skepticism from insurers and other entrenched stakeholders, which has been difficult for even the most motivated health systems to overcome.

“Culture Eats Strategy for Breakfast” But Probably Not Right Now

Posted on by • Posted in Board, Culture, Differentiation, Growth, Growth Strategy, Key Metrics, Key Performance Indicators, Leadership, Leadership Culture, Leadership Vision, Strategic Relevance, Strategic Workstreams, Strategy, Transformation, Transformation Strategy • Leave a comment

https://www.kaufmanhall.com/insights/thoughts-ken-kaufman/current-management-issues-healthcare-c-suite?mkt_tok=NjU0LUNOWS0yMjQAAAGN5bowgtV1D72jA8pbxTCk4NjIzNuu9fxXT5eRT0vb8A3oKGzQB_5C2mtXCgYRufhJVxSpI0VqOQ6lwqJvDhs6pzxAVL1Xsoxc5EfcQUJr7Bhu

2022 and 2023 have been particularly difficult operating years for hospital providers. The financial challenges stand out but as we concluded in the August 7, 2023, blog, strategic planning and vision issues may be more compelling over the long term.

We previously identified two strategic issues that need to be reckoned with:

  1. Strategic Relevance. Has everything changed organizationally post-Covid or does it just feel that way? If your strategy still seems dynamic and relevant, how do you capitalize on that? If your strategy feels entirely lost, how do you recapture organizational excitement and enthusiasm?
  2. Vision. How important is organizational vision right now? You know the old saying, “a camel is a horse designed by a committee.” And many vision statements wind up looking more like that camel than like that desired horse. But be that as it may: Covid has been so disruptive to the organizational momentum of hospitals that finding a relevant and executable vision should be top of mind right now.

Given circumstances, one obvious conclusion is that any strategic exercise undertaken in the current moment needs to be well accomplished. Executive teams, clinicians, and Boards are simply too distracted or too tired to spend time on planning processes that are not well thought out and highly directed. This immediate observation next demands a discussion that outlines post-Covid strategic principles, definitions, and the creation of a vision that relates immediately to actionable strategy. It would be an understatement to note that for hospitals there is no “strategic time” to waste.

Start the post-Covid planning process with four very clear strategic definitions:

  1. Vision: A time-bounded view of the future destination of your business.
  2. Strategic Workstreams: The ways you devise to achieve the strategic vision.
  3. Goals: Goals are the lag outcomes that you seek to achieve for your customers.
  4. Metrics: Metrics measure the progress toward the goals.

Working from these definitions then allows you to move toward an organizationally appropriate vision and an actionable strategy that efficiently supports that vision as follows:

  1. The vision should drive growth. Many hospital organizations have stopped growing organically. No growth is harmful financially, clinically, intellectually, and creatively.
  2. The vision should differentiate the business from that of competitors. Everybody and everything competes with hospitals these days: other hospitals, pharmacy companies, insurers, private equity. It has no end.
  3. The vision should endeavor to solve a basic customer problem or problems. The problem list is pretty apparent. The list of helpful solutions has been harder to come by.
  4. The vision should be either incremental or transformational. In all candor, most hospitals’ post-Covid vision is going to be incremental. It takes considerable financial and capital capacity to move toward a transformational vision. That kind of capacity is available at only a small minority of hospitals nationwide.
  5. Recognize that a transformational vision will require active management of culture and stakeholders. If you pivot to a transformational vision, you are likely to upset certain stakeholders and your existing culture may need to also adjust to the transformation.
  6. Be prepared to modify or improve upon the vision, workstreams, and/or goals as you get ongoing feedback during the planning and execution process. Under any circumstances you need to be open to learning all along the way. For this to happen, your organization needs to be a listening organization and a learning organization. Not all hospitals and health systems are.

Does all this sound hard? It should sound hard because it is hard. Leading the hospital back to financial stability while finding a relevant post-Covid vison that proves to be competitive and, at the same time, energizes your team to find renewed purpose in your hospital’s work; that is unforgivably hard.

As Piet Hein, the Danish mathematician, profoundly said, “Problems worthy of attack prove their worth by fighting back.” And fighting back is the hospital job of the moment.

Note: “Culture eats strategy for breakfast” is a quote attributed to management consultant and writer Peter Drucker.

Health systems bulk up C-suites ahead of transformation

Posted on by • Posted in C-Suite, Chief Analytics Officer, Chief Digital Officer, Chief Medical Transformation Officer, Chief of Infection Control, Chief Physician Executive,, Chief Surgical Officer, Chief Transformation Officer, Executive Team, Health System, Hospital, Hospital Industry, Leadership, Leadership Transformation, Recruiting, Talent Identification, Talent Imperative, Transformation, Transformation Strategy, Transformational Change • Leave a comment

https://www.beckershospitalreview.com/hospital-management-administration/health-systems-bulk-up-c-suites-ahead-of-transformation.html

Faced with tighter margins and continued rising costs, many health system C-suites are restructuring. At least 17 health systems have reorganized executive teams and some eliminated C-suite roles.

 The chief operating officer role in particular has been on the chopping block for health systems but not everyone is slimming down.

Some are bulking up amid organizational transformation with an eye on the future.

In June, Sutter Health in Sacramento, Calif., named Todd Smith, MD, its inaugural senior vice president and chief physician executive, responsible for supporting the health system through clinical transformation. Dr. Smith will focus on service line standards, reducing variation and strengthening the system’s relationship with medical group and community physicians.

Sutter isn’t the only system adding clinical leaders to the C-suite. Mass General Brigham in Somerville, Mass., named Erica Shenoy, MD, PhD, its first chief of infection control in June. Her expanded role is accountable for leading the integration of infection control at the system and developing and implementing infection control standards, policies and measurements. She was also appointed to the National Infection Control Advisory Committee to guide HHS earlier this year.

Meritus Health in Hagerstown, Md., added physician leadership to its executive team. Adrian Park, MD, became the system’s first chief surgical officer with responsibility for building a surgical program with advanced technology and minimally invasive procedures to the system. He is known for surgical innovation in laparoscopic techniques, and holds more than 20 patents.

MaineHealth in Portland recently added Chris Thompson, MD, to the C-suite as the system’s first chief medical transformation officer. He is responsible for chief medical officer duties as well as innovating in care delivery.

Richmond, Va.-based VCU Health and OU Health in Oklahoma City named their first chief nursing executives as well earlier this year.

Health systems are also adding strategic experts with expertise in patient experience, transformation and data analytics.

Atlanta-based Emory Healthcare created a new role for Amaka Eneanya, MD, to serve as chief transformation officer, accountable for enhancing patient and clinician experiences. She took on the role in July and is tasked with developing systemwide strategies to boost patient experience, improve access to care, increase community engagement and enrich clinician experience. Dr. Eneanya works with the system’s diversity, equity and inclusion office to prioritize strategies for health equity, diversity and inclusion in care delivery as well.

“Amaka is a forward-thinking leader who is well versed in transformational strategy and operational structure and will help us move Emory Healthcare to the next level,” said Joon S. Lee, MD, CEO of Emory Healthcare. “We look forward to working with her in our continued pursuit to transform and strengthen patient access and the patient experience.”

Last year, Centura Health in Centennial, Colo., also added a chief transformation officer, Scott Lichtenberger, MD, as a new position to balance short-term improvements and long-term value. He is responsible for ensuring the system delivers results quickly.

Finally, Cleveland Clinic has elevated another IT leader into the C-suite in recent weeks. Albert Marinez was named the system’s first chief analytics officer, set to begin his new role Aug. 28. He previously served as chief analytics officer of Intermountain Health in Salt Lake City, and will be responsible for overseeing data strategies for better patient care and lower costs at Cleveland Clinic. He will also have accountability for boosting the system’s growth alongside chief digital officer Rohit Chandra, PhD.

What CEOs want CFOs to focus on

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Fifty-four percent of CFOs say that their CEOs are asking them to focus on cost reduction while 40 percent indicate that their CEOs want them honing in on strategy and transformation, according to Deloitte’s “CFO Signals Survey 2Q 2023.”

More than one-quarter of CFOs in the survey reported that their CEOs are asking them to focus on working capital efficiency and risk management while over one-third of CFOs said their CEOs want them focused on strategy and transformation, performance management, revenue growth, investment and capital/financing. 

Since 2010, Deloitte has surveyed leading CFOs representing some of North America’s largest companies to provide insight into the business environment, company priorities and expectations, finance priorities and CFOs’ priorities. 

Participating CFOs represent diversified, large companies, with 81 percent of respondents reporting revenue in excess of $1 billion. Twenty-three percent are from companies with more than $10 billion in annual revenue, according to Deloitte. 

Value-vased care battle: Kaiser-Geisinger vs. Amazon, CVS, Walmart

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https://www.linkedin.com/pulse/value-vased-care-battle-kaiser-geisinger-vs-amazon-cvs-pearl-m-d-/

For decades, research studies and news stories have concluded the American system is ineffective,

too expensive and falling further behind its international peers in important measures of performance: life expectancy, chronic-disease management and incidence of medical error.

As patients and healthcare professionals search for viable alternatives to the status quo, a recent mega-merger is raising new questions about the future of medicine.

In April,  Kaiser Permanente acquired Geisinger Health under the banner of newly formed Risant Health. With more than 185 years of combined care-delivery experience, Kaiser and Geisinger have long been held up as role models of the value-based care movement.

Eyeing the development, many speculated whether this deal will (a) ignite widespread healthcare transformation or (b) prove to be a desperate attempt at relevance (Kaiser) or survival (Geisinger).

Whether incumbents like Kaiser Permanente and Geisinger can lead a national healthcare transformation or are displaced by new entrants will depend largely on whether they can deliver value-based care on a national scale.

In Search Of Healthcare’s Holy Grail

Value-based care—the simultaneous provision of high quality, convenient and affordable medical care—has long been the aim of leading health systems like Kaiser, Geisinger, Mayo Clinic, Cleveland Clinic and dozens more.

But results to-date have often failed to match the vision.

The need for value-based care is urgent. That’s because U.S. health and economic problems are expected to get worse, not better, over the next decade. According to federal governmental actuaries, healthcare expenditures will rise from $4.2 trillion today to $7.2 trillion by 2031. At that time, these costs are predicted to consume an estimated 19.6% of the U.S. Gross Domestic Product.

Put simply: The U.S. will nearly double the cost of medical care without dramatically improving the health of the nation.

For decades, health policy experts have pointed out the inefficiencies in medical care delivery. Research has estimated that inappropriate tests and ineffective procedures account for more than 30% of all money spent on American medical care.

This combination of troubling economics and untapped opportunity explain why value-based care has become medicine’s holy grail. What’s uncertain is whether the transformation in healthcare delivery and financing will be led from inside or outside the healthcare system.

Where The Health-System Hopes Hang

For years, Kaiser Permanente has led the nation in clinical quality and patient outcomes based on independent, third-party research via the National Committee for Quality Assurance (NCQA) and Medicare Star ratings. Similarly, Geisinger was praised by President Obama for delivering high-quality care at a cost well below the national average.

And yet, these organizations, and many other highly regarded national and regional health systems, are extremely vulnerable to disruption, especially when their strategy and operational decisions fail to align.

Kaiser, for its part, has struggled with growth while Geisinger’s care-delivery strategy has proven unsuccessful in recent years. Failed expansion efforts forced KP to exit multiple U.S. markets, including New York, North Carolina, Kansas and Texas. More recently, several of its existing regions have failed to grow market share and weakened financially.

Meanwhile, Geisinger has fallen on hard times after decades of market domination. As Bob Herman reported in STAT News: “Failed acquisitions, antitrust scrutiny, leadership changes, growing competition from local players, and a pandemic that temporarily upended how patients got care have forced Geisinger to abandon its independence. The system is coming off a year in which it lost $240 million from its patient care and insurance operations.”

Putting the pieces together, I believe the Kaiser-Geisinger deal represents an industry undergoing massive change as health systems face intensifying pressure from insurers and a growing threat from retailers like Amazon, CVS and Walmart. This upcoming battle over the future of value-based care represents a classic conflict between incumbents and new entrants.

Can The World’s Largest Companies Disrupt U.S. Healthcare?

Retail giants, including Amazon, Walmart and CVS, are among the nation’s 10 largest companies based on annual revenue.

They have a broad geographic presence and strong relationships with almost all self-funded businesses. Nearly all have acquired the necessary healthcare pieces—including clinicians, home-health services, pharmacies, insurance arms and electronic medical record systems—to replace the current medical system.

And yet, while these companies expand into medical care and financing, their core businesses are struggling, resulting in announced store closures and layoffs. As newcomers to the healthcare market, they have been forced to pay premium dollars to acquire parts of the delivery system. All have a steep learning curve ahead of them.

The Challenge Of Healthcare Transformation

American medicine is a conglomerate of monopolies (insurers, hospitals, drug companies and private-equity-owned medical practices). Each works to maximize its own revenue and profit. All are unwilling to innovate in ways that benefit patients when doing so comes at the sacrifice of financial performance.

One problem stands at the center of America’s soaring healthcare costs: the way doctors, hospitals and drug companies are paid.

The dominant payment methodology in the United States, fee-for-service, rewards healthcare providers for charging higher prices and increasing the number (and complexity) of services offered—even when they provide no added value.

The message to doctors and hospitals is clear: The more you do, and the greater market control you have, the higher your income and profit. This is the antithesis of value-based care.

The alternative to fee-for-service payments, capitation, involves paying a single, up-front sum to the providers of care (doctors and hospitals) to cover the total annual cost for a population of patients. This model, unlike fee-for-service, rewards effectiveness and efficiency. Capitation creates incentives to prevent disease, reduce complications from chronic illness, and diminish the inefficiencies and redundancies present in care delivery. Capitated health systems that can prevent heart attacks, strokes and cancer better than others are more successful financially as a result. 

However, it’s harder than it sounds to translate what’s best for patients into everyday decisions and actions. It’s one thing to accept a capitated payment with the intent to implement value-based care. It’s another to put in place the complex operational improvements needed for success. Here are the roadblocks that Kaiser-Geisinger will face, followed by those the retail giants will encounter.

3 Challenges For Kaiser-Geisinger:

  1. Involving Clinical Experts. Kaiser Permanente is a two-part organization and when the insurance half (Kaiser) decided to acquire Geisinger, it did so without input or involvement from the half of the organization responsible for care-delivery (Permanente). This spells trouble for Geisinger, which must navigate a complex turnaround without the operational expertise or processes from Permanente that, in the past, helped Kaiser Permanente grow market share and lead the nation in clinical quality.
  2. Going All In. To meet the healthcare needs of most its patients, Geisinger relies on community doctors who are paid on a fee-for-service basis. Generally, the fee-for-service model is predicated on the assumption that higher quality and greater convenience require higher prices and increased costs. With Geisinger’s distributed model, it’ll be very difficult to deliver consistent, value-based care.
  3. Inspired Leadership. Major improvements in care delivery require skilled leadership with the authority to drive clinical change. In Kaiser Permanente, that comes through the medical group and its physician CEO. In Geisinger’s hybrid model, independent doctors have no direct oversight or central accountability structure. Although Risant Health could be an engine for value-based medical care, it’s more likely to serve the role of a “holding company,” capable of recommending operational improvements but incapable of driving meaningful change.

3 Challenges For The Retail Giants:

  • More Medical Offerings. Amazon, Walmart and CVS are successfully acquiring primary care (and associated telehealth) services. But competing with leading health systems will require a more wholistic, system-based approach to keep medical care affordable. This won’t be easy. To avoid ineffective, expensive specialty and hospital services, they will need to hire their own specialists to consult with their primary care doctors. And they will have to establish centers of excellence to provide heart surgery, cancer treatment, orthopedic care and more with industry-leading outcomes. But to meet the day-to-day and emergent needs of patients, they also will have to establish contracts with specialists and hospitals in every community they serve.  
  • Capitalizing On Capitation. Already, the retail giants have acquired organizations well-versed in delivering patient care through Medicare Advantage, a capitated alternative to traditional (fee-for-service) Medicare plans. It’s a good start. But the retailers must do more than dip a toe in value-based care models. They must find ways to gain sufficient experience with capitation and translate that success into value-based contracts with self-funded businesses, which insure tens of millions of patients.
  • Defining Leadership. Without an effective and proven clinical leadership structure, the retail giants will be no more effective than their mainstream competitors when it comes to implementing improvements and shifting the culture of medicine to one that is customer- and service-focused.

Be they incumbents or new entrants, every contender will hit a wall if they cling to today’s failing care delivery model. The secret ingredient, which most lack and all will need to embrace in the future, is system-ness.

For all of the hype surrounding value-based care, fragmentation and fee-for-service are far more common in American healthcare today than integration and capitation.

Part two of this article will focus on how these different organizations—one set inside and one set outside of medicine—can make the leap forward with system-ness. And, in the end, you’ll see who is most likely to emerge victorious.

America’s Hospitals Need a Makeover

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A couple of months ago, I got a call from a CEO of a regional health system—a long-time client and one of the smartest and most committed executives I know. This health system lost tens of millions of dollars in fiscal year 2022 and the CEO told me that he had come to the conclusion that he could not solve a problem of this magnitude with the usual and traditional solutions. Pushing the pre-Covid managerial buttons was just not getting the job done.

This organization is fiercely independent. It has been very successful in almost every respect for many years. It has had an effective and stable board and management team over the past 30 to 40 years.

But when the CEO looked at the current situation—economic, social, financial, operational, clinical—he saw that everything has changed and he knew that his healthcare organization needed to change as well. The system would not be able to return to profitability just by doing the same things it would have done five years or 10 years ago. Instead of looking at a small number of factors and making incremental improvements, he wanted to look across the total enterprise all at once. And to look at all aspects of the enterprise with an eye toward organizational renovation.

I said, “So, you want a makeover.”

The CEO is right. In an environment unlike anything any of us have experienced, and in an industry of complex interdependencies, the only way to get back to financial equilibrium is to take a comprehensive, holistic view of our organizations and environments, and to be open to an outcome in which we do things very differently.

In other words, a makeover.

Consider just a few areas that the hospital makeover could and should address:

There’s the REVENUE SIDE: Getting paid for what you are doing and the severity of the patient you are treating—which requires a focus on clinical documentation improvement and core revenue cycle delivery—and looking for any material revenue diversification opportunities.

There is the relationship with payers: Involving a mix of growth, disruption, and optimization strategies to increase payments, grow share of wallet, or develop new revenue streams.

There’s the EXPENSE SIDE: Optimizing workforce performance, focusing on care management and patient throughput, rethinking the shared services infrastructure, and realizing opportunities for savings in administrative services, purchased services, and the supply chain. While these have been historic areas of focus, organizations must move from an episodic to a constant, ongoing approach.

There’s the BALANCE SHEET: Establishing a parallel balance sheet strategy that will create the bridge across the operational makeover by reconfiguring invested assets and capital structure, repositioning the real estate portfolio, and optimizing liquidity management and treasury operations.

There is NETWORK REDESIGN: Ensuring that the services offered across the network are delivered efficiently and that each market and asset is optimized; reducing redundancy, increasing quality, and improving financial performance.

There is a whole concept around PORTFOLIO OPTIMIZATION: Developing a deep understanding of how the various components of your business perform, and how to optimize, scale back, or partner to drive further value and operational performance.

Incrementalism is a long-held business approach in healthcare, and for good reason. Any prominent change has the potential to affect the health of communities and those changes must be considered carefully to ensure that any outcome of those changes is a positive one. Any ill-considered action could have unintended consequences for any of a hospital’s many constituencies.

But today, incrementalism is both unrealistic and insufficient.

Just for starters, healthcare executive teams must recognize that back-office expenses are having a significant and negative impact on the ability of hospitals to make a sufficient operating margin. And also, healthcare executive teams must further realize that the old concept of “all things to all people” is literally bringing parts of the hospital industry toward bankruptcy.

As I described in a previous blog post, healthcare comprises some of the most wicked problems in our society—problems that are complex, that have no clear solution, and for which a solution intended to fix one aspect of a problem may well make other aspects worse.

The very nature of wicked problems argues for the kind of comprehensive approach that the CEO of this organization is taking—not tackling one issue at a time in linear fashion but making a sophisticated assessment of multiple solutions and studying their potential interdependencies, interactions, and intertwined effects.

My colleague Eric Jordahl has noted that “reverting to a 2019 world is not going to happen, which means that restructuring is the only option. . . . Where we are is not sustainable and waiting for a reversion is a rapidly decaying option.”

The very nature of the socioeconomic environment makes doing nothing or taking an incremental approach untenable. It is clearly beyond time for the hospital industry makeover.