Cartoon – Strategy Execution
Cartoon – Tracking Key Metrics
Cartoon – Betting on Stupidity
Cartoon – Talent Screening
Still Time For a Healthcare Industry Reinvention (Part 2)
Editor’s Note: This is Part 2 of a multi-part series on healthcare revolution. This article builds on Part 1, which you can read here.
Based on a 23-year career as a solo-practicing rheumatologist, internist and geriatrician, followed by 18 years as president and CEO of a 715-bed, two-hospital healthcare system, I recently shared thoughts about the current stressed healthcare system including profit margin squeeze, patient’s needs and suggested options of subdividing care into acute, urgent, and elective facilities. The bottom-line quote from the Mayo Brothers, “The Patient’s Needs Come First,” is my declaration to use prevention as the way to focus our attention to those we serve.
Recognizing and Addressing the Challenge
Patients’ healthy life expectancy should be the focus of the healthcare industry, communities, employers and governments. People live longer, happier and healthier lives when productivity improves and costs decrease.
The U.S. life expectancy at birth is at the lowest level since 1996. The 0.9-year drop in life expectancy in 2021 and the 1.8-year drop in 2020 were the biggest two-year declines in life expectancy since 1921-1923. The current decline — 77.0 to 76.1 years — demands a change, whether welcome or not. [1]
Our nation’s metrics are embarrassing compared to other countries. Consider just one. “Average life expectancy in Costa Rica has steadily increased from 55 years in 1950 to 81 years today — far outpacing the U.S. Even more notable: the country has achieved this success while spending far less than the U.S. as a share of income which is already lower than ours.” [2] This Central American country is about the size of West Virginia and has a vast and sparsely populated terrain in addition to a few cities. Older adults, even in rural areas in Costa Rica, do well compared to our nation. Opportunities abound to learn from others. [3]
Physicians, Non-Physician Caregivers and Community Responses
Incumbents never welcome disruption. Currently, volume drives the U.S. health payment system. Profitability is proportional to the number of sick-care encounters. The more visits to a physician or hospital parallels greater demand for pharmaceuticals and devices/implants. Higher volume translates into increased insurance premiums the following year, of which the insurance company receives a percentage.
Prevention is not top of mind and redirecting patients to focused factories would be anathema for local hospitals and physicians — both groups are volume dependent.
Offloading outpatient care to lower-cost caregivers — Walmart, CVS, Walgreens, and others — cuts into the work and profit of primary care physicians in independent and health-system-owned group practices. The same with telemedicine. Nurse practitioners and physician assistants, under the supervision of a physician, can bill Medicare at 85% of a physician’s fee with modest restrictions. This positions them to both help and compete with primary care physicians. [4] New entrants — companies and non-physician caregivers — will lower overall costs. That’s a good thing unless you are the traditional medical office or primary care physician being replaced.
Communities have pride in their local healthcare system, especially since it is typically the largest or second largest employer in town. Rethinking where to find urgent or elective care that would require some travel would be a complete mindset change, like the change in shopping after big box stores and online shopping matured. Some communities with abundant resources may support under-utilized healthcare (and retail) facilities but keeping afloat without adequate volume is challenging.
Conditions change and with the importance of health and well-being, patients’ mindsets can evolve to include some travel for urgent and elective care. For its 1.1 million employees, Walmart and other large national employers instituted a Centers of Excellence Program that directs patients with non-acute episodic needs to health institutions that treat them cost-effectively with positive outcomes.
Patients and a companion have 100% of the cost for surgery plus travel expenses for certain spine, cardiac, organ transplants, hip/knee replacements, weight loss surgery and fertility. Walmart also offers a record review for cancer care at a handful of selected healthcare systems across the nation. [5] Since cancer care requires both an accurate diagnosis and usually prolonged treatment, the selected health system develop protocols for a patient that are implemented conveniently for the sufferer.
Rural healthcare is already struggling financially and faces greater threat. Small rural hospitals are failing. Addressing the three levels of medical need with a centralized system might serve patients better than every community trying to be everything to everyone.
Cities with duplicative and redundant services could provide better centralized care more efficiently for a wider geographic area. Changing the “pride in ownership” will require more pain, namely financial pressure, but the reward for patients will be better objective outcomes. Coopetition will facilitate the transformation.
Something has got to give. With increased transparency, patients have never been better informed, and they are already seeking specialized care with better outcomes. Transportation and virtual audio/visual communication is easier than ever before, accelerating change for complex patients.
Healthcare System Evolution
In my opinion, the local hospital of the future will be an ED, OR and ICU with a birthing center attached. A regional medical center will be within driving distance for urgent and elective care. Highly specialized national centers will serve as focus factories for sophisticated medical and surgical care, each serving patients from larger geographic areas, even from across the nation. Cancer surgery, joint replacements, open heart surgery, and other major non-emergency care and surgery at these focus factories will deliver higher quality more efficiently. As noted in Part 1, outcomes are objectively better at institutions focused on a limited number of conditions. [6]
Although this plan might sound exotic, other nations around the world already benefit with specialized, nonredundant hospitals. [7] And global competition is real. The U.S. won’t dominate high-end specialty care like it did in the 1900s. By the end of this century it will be a tripolar world shared between the U.S., China and India. Redistributing resources in America from less efficient healthcare to education, infrastructure, environment, and other worthwhile endeavors will help everyone. [8]
Outpatient care will continue the migration to virtual. Online shopping initially seemed exotic, but now packages arrive daily delivered to homes by a fleet of small vans. And as much as one pines for the old days with a personal intimate relationship with a caregiver, the power of quick access to accurate care will overcome nostalgia. Dr. Marcus Welby will be a distant memory. Consider the profound change from working five days a week in a physical office to the current geographically agnostic 24/7 virtual business community. Formerly successful commercial real estate owners are repurposing their now half-empty buildings.
When will the economics mandate a change? With a slower evolution, the existing systems have a chance to accommodate. A rapid and severe economic downturn is more likely to stimulate a quicker move. Costs matter, particularly as resources become more limited.
Medically self-insured employers like Walmart are already leading the way. Change is happening with younger patients sorting themselves out by going to walk-in clinics in big box chain stores and older folks seeking specialized care from major national systems. As outcomes improve and receive wider recognition, these positive changes will accelerate, creating a “flywheel effect.”
The End Game
Like it or not, sooner or later as a patient or provider we will transform. Understanding the need to change along with better outcomes for patients, who everyone is trying to serve, should improve provider satisfaction.
Subsequently, costs will drop, productivity will increase, and precious resources redirect to preventing illness and improving quality of life. Helping everyone live a longer, happier, and healthier life is an achievable goal. Healthcare systems can and should lead the transformation.
In ‘American Hospitals’ Pride Comes Before the Fall
The film “American Hospitals: Healing a Broken System” premiered in Washington, D.C., on March 29. This documentary exposes the inconvenient truths embedded within the U.S. healthcare system. Here is a dirty dozen of them:
- Over half of hospital care is unnecessary, either wasteful or for preventable acute conditions.
- Administrative costs account for 15-25% of total healthcare expenditures.
- U.S. per-capita healthcare spending is more than twice the average cost of the world’s 12 wealthiest countries.
- Medical debt is a causal factor in two-thirds of all personal bankruptcies.
- American adults fear medical bills more than contracting a serious disease. Nearly 40% of Americans — a record — delayed necessary medical care because of cost in 2022.
- Low-income urban and rural communities lack access to basic healthcare services.
- The financial benefits of tax exemption for hospitals are far greater than the cost of the charitable care they provide.
- Medical error is unacceptably high.
- Hospitals are largely unaccountable for poor clinical outcomes.
- The cost of commercially insured care is multiples higher than the cost of government-insured care for identical procedures.
- Customer service at hospitals is dreadful.
- Frontline clinicians are overburdened and leaving the profession in droves.
Healthcare still operates the same way it has for the last one hundred years — delivering hierarchical, fragmented, hospital-centric, disease-centric, physician-centric “sick” care. Accordingly, healthcare business models optimize revenue generation and profitability rather than health outcomes. These factors explain, in part, why U.S. life expectancy has declined four of the five years and maternal deaths are higher today than a generation ago.
It’s hard to imagine that the devil itself could create a more inhumane, ineffective, costly and change-resistant system. Hospitals consume more and more societal resources to maintain an inadequate status quo. They’re a major part of America’s healthcare problem, certainly not its solution. Even so, hospitals have largely avoided scrutiny and the public’s wrath. Until now.
“American Hospitals” is now playing in theaters throughout the nation. It chronicles the pervasive and chronic dysfunction plaguing America’s hospitals. It portrays the devastating emotional, financial and physical toll that hospitals impose on both consumers and caregivers.
Despite its critical lens, “American Hospitals” is not a diatribe against hospitals. Its contributors include some of healthcare’s most prominent and respected industry leaders, including Donald Berwick, Elizabeth Rosenthal, Shannon Brownlee and Stephen Klasko. The film explores payment and regulatory reforms that would deliver higher-value care. It profiles Maryland’s all-payer system as an example of how constructive reforms can constrain healthcare spending and direct resources into more effective, community-based care.
The United States already spends more than enough on healthcare. It doesn’t need to spend more. It needs to spend more wisely. The system must downsize its acute and specialty care footprint and invest more in primary care, behavioral health, chronic disease management and health promotion. It’s really that simple.
My only critique of “American Hospitals” is many of its contributors expect too much from hospitals. They want them to simultaneously improve their care delivery and advance the health of their communities. This is wishful thinking. Health and healthcare are fundamentally different businesses. Rather than pivoting to population health, hospitals must focus all their efforts on delivering the right care at the right time, place and price.
If hospitals can deliver appropriate care more affordably, this will free up enormous resources for society to invest in health promotion and aligned social-care services. In this brave new world, right-sized hospitals deliver only necessary care within healthier, happier and more productive communities.
All Americans deserve access to affordable health insurance that covers necessary healthcare services without bankrupting them and/or the country. Let me restate the obvious. This requires less healthcare spending and more investments in health-creating activities. Less healthcare and more health is the type of transformative reform that the country could rally behind.
At issue is whether America’s hospitals will constructively participate in downsizing and reconfiguring the nation’s healthcare system. If they do so, they can reinvent themselves from the inside out and control their destinies.
Historically, hospitals have preferred to use their political and financial leverage to protect their privileged position rather than advance the nation’s well-being. Like Satan in Milton’s “Paradise Lost,” they have preferred to reign in hell rather than serve in heaven.
Pride comes before the fall. Woe to those hospitals that fight the nation’s natural evolution toward value-based care and healthier communities. They will experience a customer-led revolution from outside in and lose market relevance. Only by admitting and addressing their structural flaws can hospitals truly serve the American people.
Quotes of the Day: Rooneyisms
I’ve learned…. That the best classroom in the world is at the feet of an elderly person.
I’ve learned…. That when you’re in love, it shows.
I’ve learned…. That just one person saying to me, ‘You’ve made my day!’ makes my day.
I’ve learned…. That having a child fall asleep in your arms is one of the most peaceful feelings in the world.
I’ve learned…. That being kind is more important than being right.
I’ve learned…. That you should never say no to a gift from a child.
I’ve learned…. That I can always pray for someone when I don’t have the strength to help him in some other way.
I’ve learned…. That no matter how serious your life requires you to be, everyone needs a friend to act goofy with.
I’ve learned…. That sometimes all a person needs is a hand to hold and a heart to understand.
I’ve learned…. That simple walks with my father around the block on summer nights when I was a child did wonders for me as an adult.
I’ve learned…. That life is like a roll of toilet paper. The closer it gets to the end, the faster it goes.
I’ve learned…. That we should be glad God doesn’t give us everything we ask for.
I’ve learned…. That money doesn’t buy class.
I’ve learned…. That it’s those small daily happenings that make life so spectacular.
I’ve learned…. That under everyone’s hard shell is someone who wants to be appreciated and loved.
I’ve learned…. That to ignore the facts does not change the facts.
I’ve learned…. That when you plan to get even with someone, you are only letting that person continue to hurt you.
I’ve learned…. That love, not time, heals all wounds.
I’ve learned…. That the easiest way for me to grow as a person is to surround myself with people smarter than I am.
I’ve learned…. That everyone you meet deserves to be greeted with a smile..
I’ve learned…. That no one is perfect until you fall in love with them.
I’ve learned… That life is tough, but I’m tougher.
I’ve learned…. That opportunities are never lost; someone will take the ones you miss.
I’ve learned…. That when you harbor bitterness, happiness will dock elsewhere.
I’ve learned…. That I wish I could have told my Mom that I love her one more time before she passed away.
I’ve learned…. That one should keep his words both soft and tender, because tomorrow he may have to eat them.
I’ve learned….. That a smile is an inexpensive way to improve your looks.
I’ve learned….. That when your newly born grandchild holds your little finger in his little fist, that you’re hooked for life.
I’ve learned…. That everyone wants to live on top of the mountain, but all the happiness and growth occurs while you’re climbing it.
I’ve learned…. That the less time I have to work with, the more things I get done.
What Hospital Systems Can Take Away From Ford’s Strategic Overhaul
On today’s episode of Gist Healthcare Daily, Kaufman Hall co-founder and Chair Ken Kaufman joins the podcast to discuss his recent blog that examines Ford Motor Company’s decision to stop producing internal-combustion sedans, and talk about whether there are parallels for health system leaders to ponder about whether their traditional strategies are beginning to age out.
What to know about the latest inflation report
Inflation moderated notably in March as a decline in gas prices helped to pave the way for the slowest pickup in prices in nearly two years, providing relief for many American consumers and a positive talking point for President Biden.
The Consumer Price Index climbed 5 percent in the year through March, down from 6 percent in February. That marked the slowest pace since May 2021.
Still, the details of the report underlined that inflation retains concerning staying power under the surface: A so-called core index that aims to get a clearer sense of price trends by stripping out food and fuel costs, both of which can be volatile, picked up by 5.6 percent from a year earlier. That was up slightly from February’s 5.5 percent increase, and it marked the first acceleration in the yearly number since September.
The mixed signals in the fresh inflation data — which, taken as a whole, suggested that price increases are meaningfully moderating but the progress remains gradual — come at a challenging economic moment for the Federal Reserve. The central bank is the government’s main inflation fighter, and it has been trying to wrestle price increases back under control for slightly more than a year, raising interest rates to nearly 5 percent from near zero as recently as March 2022 to slow the economy and weigh down costs.
Officials are now assessing how their policy changes are working, and they are trying to gauge how much more they need to do to ensure that price increases come fully under control. Inflation has been slowing after peaking at about 9 percent last summer, but the process has been a slow one. It remains a long way back to the 2 percent inflation that was normal before the onset of the pandemic in 2020.
Uncertainty over how quickly and completely price increases will cool is being compounded by recent developments. A series of high-profile bank blowups last month could slow the economy, but it is unclear by how much. Some Fed officials are urging caution in light of the turmoil, even as others warn that the central bank should keep its foot on the economic brake and remain focused on its fight against rising prices.
The new data “solidifies the case for the Fed to do another hike in May, and to proceed cautiously from here,” said Blerina Uruci, chief U.S. economist at T. Rowe Price, later adding that “it will take time to bring inflation down.”
Fed officials target 2 percent inflation, which they define using a different index: the Personal Consumption Expenditures measure, which uses some data from the consumer price measure but is calculated differently and released a few weeks later. That measure has also been sharply elevated.
While Wednesday’s report showed an uptick in core inflation on an annual basis — one that economists had largely expected — Ms. Uruci said that it also offered some encouraging signs. The core inflation measure slowed slightly on a monthly basis, when the March figures were compared to those in February.
And a few important services prices, which the Fed is watching closely for a sense of whether price increases are poised to fade, cooled notably. Rent of primary residences picked up 0.5 percent compared to the prior month, down from 0.8 percent in the previous reading, for instance. Housing inflation broadly is expected to slow in 2023, and that appears to be starting to take hold.
“There are signs in the details to suggest we’re making some progress toward slowing inflation,” Ms. Uruci said. “It’s not where it needs to be, but it’s progress.”
But those hopeful signs do not mean that inflation will fade smoothly and rapidly. The slowdown in the overall index, for instance, may not last: A big chunk of the decline is owed to a drop in gas prices that may not be sustained.
And a few other indexes continued to show quick price increases, including new vehicles and hotel rooms.
As they try to bring inflation to heel, some central bankers have suggested that they may need to further raise interest rates.
The Fed’s latest estimates, released shortly after the collapse of Silicon Valley Bank and Signature Bank in March, suggested that officials could lift rates another quarter-point this year, to just above 5 percent. The central bank will announce its next policy decision on May 3.
On Tuesday, John C. Williams, the president of the Federal Reserve Bank of New York, said that the Fed had more work to do in bringing down price increases and suggested that the central bank’s March forecast for one more quarter-point rate move was still a “reasonable starting place.”
But Austan D. Goolsbee, the president of the Federal Reserve Bank of Chicago, suggested that recent bank failures could make it tougher for businesses and consumers to access credit, slowing the economy, stoking uncertainty and creating a “need to be cautious.”
“We should gather further data and be careful about raising rates too aggressively until we see how much work the headwinds are doing for us in getting down inflation,” Mr. Goolsbee said.
Higher interest rates have made it much more expensive to borrow money to buy a house or expand a business. That is slowing economic activity. As demand cools and the labor market softens, wage growth is also moderating.
That could help to pave the way for cooler inflation. When wages are climbing quickly, companies might charge more to try to cover their labor bills, and their customers are likely to be able to afford the steeper prices. But as households become more strapped for cash, it could become harder for businesses to raise prices without scaring away shoppers.
Healthcare added 34K jobs in March as temp nursing demand wanes
Dive Brief:
- Healthcare job growth continued to climb in March with the industry adding 34,000 jobs last month, according to a report released from the Bureau of Labor Statistics on April 7.
- The job growth is lower than the six-month average monthly job gain of 54,000 in healthcare. Home health services and hospitals recorded the most gains, adding 15,000 and 11,000 jobs, respectively.
- The BLS report comes as demand for temporary nurses declines with median rates of temp staff billing down, according to a report out last week from Jefferies.
Dive Insight:
Labor shortages have been a continuing obstacle for hospitals and health systems, after the coronavirus pandemic spurred industry job reductions and clinicians left the field due to burnout. Temporary nurse staffing agencies swooped in to ease labor shortages, with hospital systems paying higher rates to temp agencies to staff their floors.
Hospitals ended last year with negative margins, driven by labor expenses that rose as much as 36% compared with pre-pandemic levels. The average weekly rate for travel nurses reached $3,900 in January 2022, according to staffing platform Vivian Health, prompting lawmakers and industry groups to ask the White House to investigate nurse staffing agencies.
But hospitals may be catching a break from labor and temporary staffing pressures. Data from private healthcare staffers, including Aya Healthcare and Fastaff, show that demand for temporary nurses declined by 2.2%, with median bill rates dropping 2.9% week over week, according to the Jefferies report.
The accelerated decline in demand and bill rates could be a sign of labor woes easing, especially for nurse-dependent hospital operators like HCA Healthcare, according to the report.
“As we see order and bill rate data for temp nurses decline, we are gaining optimism that nurse-dependent healthcare providers such as hospitals [HCA Healthcare, Community Health Systems, Tenent Healthcare] and post-acute players [Amedisys, Encompass Health, Enhabit] will begin to see labor headwinds ease, which should help these companies achieve or exceed earnings goals this year,” the report said.
While labor shortages have battered HCA Healthcare and CHS, both operators suggested in recent earnings reports that labor pains could be easing. HCA reported in January that it was decreasing its nursing turnover and CHS reported in October that it had made progress in reducing its contract labor expenses.
Hospitals continue gaining jobs
Reports have showed that labor shortages appear to be easing this year, with a December report from Fitch Ratings noting that staffing shortages at nonprofit hospitals appeared to be incrementally waning.
HENRY KOTULA 