The recent breathtaking flurry of mega-mergers coupled with increasingly challenging market forces and an ever shifting political landscape has cast a cloud of confusion regarding where the U.S. healthcare delivery system is heading.
So, where do you go to find the map?
Every year, the JP Morgan Healthcare Conference provides an incredibly efficient snapshot of the strategies for large healthcare delivery systems, the hub for healthcare in the U.S. Most of these organizations are also the largest employers in their respective states. The conference took place this week in San Francisco with over 20 healthcare systems presenting, including Advocate Health Care, Aurora Health Care, Baylor Scott & White Health, Catholic Health Initiatives, Cleveland Clinic, Geisinger Health System, Hospital for Special Surgery, Intermountain Healthcare, Mercy Health in Ohio, Northwell Health, Northwestern Medicine, Partners HealthCare System, WakeMed Health & Hospitals and many of the other big name brands in the market. Each provided their strategic roadmap in a series of 25-minute presentations from their “C” suite. If you’re looking for the GPS on strategy and a gauge on the health of healthcare, this is it.
How do their strategies differ? What direction are they heading in? There is a great line from Alice in Wonderland that goes, “If you don’t know where you’re going, any road will take you there.” You would think that line applies perfectly to the U.S healthcare system, but the good news is it actually doesn’t.
While the exact destination for everyone is TBD, the direction they are heading in is actually pretty clear and consistent. It turns out that they are all using a very similar compass, which is sending them down a similar path.
So, what are the roadside stops health systems consider absolutely necessary to be part of their journey to creating a more viable and sustainable value-based business model?
Based on the travel plans for over 20 of the largest and most prestigious healthcare delivery systems in the country, here’s your GPS and list of 12 things you “must do” on your journey.
1. You Must Scale
Clearly the headline at #JPM18 was the flurry of major announcements regarding major mergers. With that said, two of the mergers were front and center: teams were there to present from Downers Grove, Ill.-based Advocate and Milwaukee-based Aurora, which will be a $10 billion organization with 70,000 employees, as well as San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, which will be a $28 billion organization with 160,000 employees. The size and scale of these mergers is pretty stunning. While the announcement of these and the other recent mega-mergers has forced many into their board room to determine what the deals mean to them, the consensus at the conference was this: There are a number of different paths forward to achieve scale. Some, like Baylor Scott & White in Texas, have aggressive regional expansion plans. Others are betting on partnerships to provide the same or even more value. Taking a pulse of the room, two things were clear. The first is there is no definition of scale any more in this market. The second is that, despite this flurry of mergers, “getting really big” is not the only destination.
2. You Must Pursue “Smart Growth” and Find New Revenue Streams
Running counter to the merger narrative in the market, Salt Lake City-based Intermountain provided a good overview of the movement to what is called an “asset light” strategy of “smart growth.” This is a radically contrarian approach to the industry norm, which is the capital intensive bricks and mortar playbook of buying and building. As part of their strategy, Intermountain will open a “virtual hospital” delivering provider consultations and remote patient monitoring via telehealth. The system will also launch a number of healthcare companies every year, leveraging their considerable resources in a manner they believe will produce a higher yield. Other health systems outlined a similar stream of initiatives they have in motion to diversify their revenue streams and expand their business model into higher margin, higher growth businesses. One example is Cincinnati-based Mercy Health, which achieved strong growth and leverage via their investment in a revenue cycle management company. Advocate in Illinois formed a partnership with Walgreens. Together, they now operating 56 retail clinics and Advocate has made a significant impact on driving new patients and downstream revenue to their system. The bottom line is all now recognize that they must think and act differently to be able to continue to fund their clinical mission and serve their community.
3. You Must Measure and Manage Cost and Margins
While some are moving aggressively to get scale, everyone is looking to more effectively use the resources they have and get more operating leverage. Margin compression was a consistent theme, with many systems now moving into consistent, stable operating models around managing margins versus launching reactionary initiatives when they find a budget gap. What is emerging is a new discipline and continuous process around managing cost and margins that is starting to look similar to the level of sophistication we have seen in the past for revenue cycle management. To that end, there has been major movement in the market to implement advanced cost accounting systems, often referred to as financial decision support, which provide accurate and actionable information on cost and help organizations understand their true margins as they take on risk-based, capitated contracts. Some during the conference referred to it as the “killer app” for the financial side of driving value. Regardless of what you call it, all are moving aggressively to understand the denominator of their value equation.
4. You Must Become a Brand
Investing in and better leveraging their brand has become a strategic must for health systems. The level of sophistication is growing here as providers shift their mental model to viewing patients as “consumers.” Aurorain Wisconsin cited their dedicated Consumer Insights Group and outlined their “best people, best brand, best value” approach that has been incredibly effective both internally and externally. At the same time, the bigger investments for many health systems relative to brand are more on brand experience than brand image, with a focus on understanding and radically rethinking the consumer experience. As an example, at Danville, Pa.-based Geisinger, close to 50 percent of ambulatory appointments are scheduled and seen on the same day. And every health system is making meaningful investments in their “digital handshake” with consumer, creating and leveraging it via telehealth as well as mobile applications to enhance the customer experience.
5. You Must Operate as a System, Not Just Call Yourself One
One clear theme at #JPM18 is different organizations were at different points along the continuum of truly operating as a system vs. merely sharing a name and a logo. There are a number of reasons for this, but you are increasingly seeing tough decisions actually being made vs. just kicking the can down the road. There has been a great deal of acquisitions over the last few years coupled with a new wave of thinking relative to integration that is more aggressive and more forward-looking. This mental shift is actually a very big deal and perhaps the most important new trend. Many health systems are heavily investing in leadership development deep into their organization to drive changes much faster.
6. You Must Act Small
The word “agile” is quickly becoming part of everyone’s narrative with health systems looking to adopt the principles and processes leveraged in high tech. Chicago-based Northwestern Medicine is an example of an organization that has grown dramatically in the last five years, now approaching $5 billion in revenue. At the same time, they have still found a way to operate small, leveraging daily huddles across the organization to drive their results. The team at Raleigh, N.C.-based WakeMed has achieved a dramatic financial turnaround over the last few years, applying a similar level of rigor yielding major operational improvements in surgical, pharmacy and emergency services that have translated into better bottom line results.
7. You Must Engage Your Physicians
Employee engagement was a major theme in many of the presentations. With the level of change required both now and in the future, a true focus on culture is now clearly top of mind and a strategic must for high-performing health systems. That said, only a handful articulated a focus on monitoring and measuring physician engagement. This appears to be a major miss, given that physicians make roughly 80 percent of the decisions on care that take place and, therefore, control 80 percent of the spend. One data point that stood out was a 117 percent improvement in physician engagement at Northwestern. Major improvements will require clinical leadership and a true partnership with physicians.
8. You Must Leverage Analytics
Many have reached their initial destination of deploying a single clinical record, only to find that their journey isn’t over. While health systems have made major investments big data, machine learning and artificial intelligence, there was a consistent theme regarding the need to bring clinical and financial data together to truly understand value. Part of this path is the consolidation of systems that is now needed on the financial side of the house with a focus on deploying a single platform for financial planning, analytics and performance. The primary focus is to translate analytics not just into insights, but action.
9. You Must Protect Yourself
As organizations move deeper into data, there is increased recognition that cybersecurity is a major risk. Over 40 percent of all data breaches that occur happen in healthcare. During the keynote, JP Morgan Chase CEO Jamie Dimon shared that his organization will spend $700 million protecting itself and their customers this year. Investments in cybersecurity will continue to ramp up due to both the operational and reputational risk involved. Cybersecurity has become a board room issue and a top-of-mind initiative for executive teams at every health delivery system.
10. You Must Manage Social Determinants of Health in the Communities You Serve
Perhaps the most encouraging theme for healthcare provider organizations was the need to engage the community they serve and focus on social determinants of health. As Intermountain shared: “Zip code is more important than genetic code.” To that end, Geisinger refers to their focus on “ZNA.” They have deployed community health assistants, non-licensed workers who work on social determinants of health and have implemented a “Fresh Food Farmacy,” yielding a 20 percent decrease in hemoglobin A1c levels along with a 78 percent decrease in cost. Organizations like ProMedica Health System in Ohio have seen similar results with their focus on hunger in Toledo. WakeMed has an initiative focused on vulnerable populations in underserved communities that has resulted in a significant decrease in ER visits and admissions and over $6 million in savings.
11. You Must Help Solve the Opioid Epidemic
The opioid issue is one that healthcare professionals take very personally and feel responsible for solving. It came up in virtually in every presentation, and it’s an emotional issue for the leaders of each organization. This is good news, but the better news is that they are taking action. As an example, Geisinger invested in a CleanState Medicaid member pilot that resulted in a 23 percent decrease in ER visits and 35 percent decrease in medical spending, breaking even on their investment in less than 10 months. While many would rightly argue that the economic rationalization isn’t needed for something this important, the fact that it’s there should eliminate any excuse for anyone not taking action.
12. You Must Deliver Value
The Hospital for Special Surgery in New York is the largest orthopedics shop in the U.S. and a great example of how value-based care delivery is taking shape. Perhaps the most revealing stat they shared is that 36 percent of the time, patients receive a non-surgical recommendation when they are referred to one of their providers for a second opinion. This is exactly the type of value-based counseling and decision-making that will help flip the model of healthcare. Some systems are farther along than others. Northwestern currently has 25 percent of its patients in value-based agreements, but other systems have less. As the team from Intermountain re-stated to this audience this year, “You can’t time the market on value, you should always do the right thing, right now.” Well said.
It’s time to get started or get moving even faster.
As the saying goes, “It’s the journey, not the destination.”
Fort Lauderdale, Fla.-based Broward Health’s ex-CEO Pauline Grant sued her former employer in December 2016. The health system fired back in a counter-suit filed Dec. 1, alleging Ms. Grant violated the Anti-Kickback Statute.
Here are five things to know about the litigation.
1. North Broward Hospital District, which does business as Broward Health, claims Ms. Grant violated the system’s code of conduct by serving as secretary of the board of directors of a long-term care provider that had contracts with Broward Health, according to the Sun Sentinel.
2. The health system alleges Ms. Grant’s position on the board violated the terms of a corporate integrity agreement the hospital district entered into with the federal government in 2015. The agreement was put into place after Broward Health paid $69.5 million in September 2015 to settle allegations it violated the False Claims Act by holding improper financial relationships with physicians.
3. Broward Health also claims Ms. Grant violated the Anti-Kickback Statute while she was CEO of Broward Health North in Deerfield Beach, Fla., one of the health system’s six hospitals.
4. Broward Health’s board voted 4-1 on Dec. 1, 2016, to fire Ms. Grant. The board voted to remove Ms. Grant from her position after an independent counsel review showed potential violations of the Anti-Kickback Statute. A subsequent independent investigation found Ms. Grant “ran afoul” of federal anti-kickback law when awarding emergency room contracts to orthopedic physicians seeking to participate in Broward Health North’s on-call emergency department rotation.
5. Following her ouster, Ms. Grant sued Broward Health, accusing the system’s general counsel and four board members of violating the Florida open-meetings law to bring about her termination.
As healthcare evolves, so too are the roles of hospital and health system CFOs.
The CFO role is becoming more strategic as organizations face additional financial pressures and navigate the shift to value-based care. CFOs today generally play a greater role in operations and are seen as business partners by CEOs.
Four panelists provided thoughts on this evolving role during a session at the Becker’s Hospital Review 6th Annual CEO + CFO Roundtable in Chicago. Here are quotes from the panelists.
Jim McNey, senior vice president and CFO of North Kansas City (Mo.) Hospital, addressed the development of Centrus Health, a physician-led clinically integrated network including City, Mo.-area physicians across NKCH, the University of Kansas Health System, Merriam, Mo.-based Shawnee Mission Health and Kansas City Metropolitan Physician Association. In these types of scenarios, he said the CFO almost acts like a “salesman.”
“You have to sell these ideas to people who may not be receptive. … You’ve got to go out. You’ve got to get educated. You’ve got to stay current on what’s going on. …You can’t ever quit learning.”
Britt Tabor, executive vice president and CFO/treasurer of Chattanooga, Tenn.-based Erlanger Health System, noted the move away from the traditional CFO role.
“What I’ve seen … is there’s [now] dramatic input of the CFO from a strategic and operation standpoint. I’m meeting with two or three physicians a week talking about the business model of the health system.
“As pressures have come, we’ve hired a lot of doctors. I do think physicians are getting the idea that we’ve got to balance the quality, the patient care and the business scene,” he added.
Angela Lalas, senior vice president of finance for Loma Linda (Calif.) University Health, talked about the skills necessary for today’s CFO.
“We’ve [previously] looked at finance professionals as number crunchers and more focused on historical. Now it’s more communication and interpersonal skills [are the] top needs for finance professionals to become impactful and effective.”
Brad Fetters, COO of Prism Healthcare Partners, a healthcare consulting firm, described the finance discipline as “becoming more sophisticated.”
“What I mean by that is the leadership used to be kind of the scorecard — they were in the room to make sure the numbers jived up — then somebody else was working with physicians and influencing. What you’re seeing now … in other industries … [is] when CEOs abruptly leave … they promote the CFO because they’ve gotten more strategic, there [are]softer skills around influencing and changing behaviors. That’s what you’ve got to do with this information so those successful CFOs are in the room kind of influencing everybody.”
Abstract: This article is about the optimum relationship between an interim executive and their client. It has been a while since I wrote on Interim Executive Services. In this article, I return to the primary topic of this blog.
What is the difference between interviewing and hiring an interim vs. an employee?
First of all, it is not in your best interest to ‘hire’ an interim.
If the interim is furnished though a firm, they are more than likely paid on a W-2 and you are not technically ‘hiring’ the interim, you are engaging or entering a contact with their firm. The interim is ’employed’ by the firm and not you. Employed is loosely used in this case because while the interim may be on a W-2 program with their firm, the only time they are paid is if they’re producing billable revenue. Sadly for the interim, they get to bear all of the disadvantages of being paid by W-2 while consulting without having the ability to reap any of the benefits of being an independent expert.
Now assume that you are smart enough and lucky enough to source the perfect independent or free lance interim directly, what then?
Congratulations, you are probably well on your way to having a far superior resource that will be highly motivated to address your situation without the interference of a third party that in my experience, adds little if any value beyond sourcing the interim. If you have experience with this, you know what I’m talking about. When was the last time you saw anyone from the interim firm you engaged other your interim?
With a free agent, you will be contracting with the Interim or a company (LLC or S-4 Corporation) they own. Legally, you are dealing with a sole proprietor in most cases regardless of whether their corporate entity is involved or not. For this reason and depending upon the circumstances, you might want to get their personal guarantee of their firm’s performance.
I have a S-4 Corporation that I can use for contracting. The problem for me is that if I bill though my corporation, I am obliged to pay the federal government 9% of my earnings in the form of federal unemployment tax or FUTA that I can never claim because as an independent consultant, I cannot be ‘laid off’ so I am ineligible to receive FUTA. Don’t get me started. I have been fortunate that my clients have agreed to engage me directly and individually. A corporate structure when dealing with a sole provider affords disproportionate list to the provider.
What about insurance? Increasingly, client firms are requesting or requiring professional liability insurance. Setting aside the fact that I have never seen a claim against a professional liability policy for interim services, I have been successful in convincing my clients to name me under their Directors and Officer’s Insurance (D&O) coverage if I as an interim am going to be authorized to execute documents and take actions on behalf of my client. To me, this makes more sense for the client because if I am required to obtain insurance that will most likely be less robust than the organization’s D&O coverage, that cost is going to be passed along and in effect, the client will be paying twice for the same coverage. Not only that, in the event of a problem, you are more than likely going to be drawn into a subrogation fight. If I have no authority and I am not going to be executing documents, i.e., I am engaged to do project work, then liability insurance should be a non-issue.
In another article, I talk about how to find interim executives.
If you have found the ‘perfect’ interim for your transition or challenge, good for you. If the interim is experienced and sophisticated, you should not have any reservation about engaging them directly and putting them to work in your organization immediately.
Once the interim is aboard, do not lose sight and do not allow your organization to lose site of the purpose of the interim engagement which is usually to help an organization work through a transition usually while beginning the process of addressing major challenges or problems. The scope of the work to be performed should be mutually understood and memorialized in the contract with the Interim Executive. Subsequent departures from the agreed scope represent sub-optimization of the engagement at best and a useless waste of resources at worst.
An interim is not an employee and the more you treat them like an employee, the less effective they will be and the higher risk you will bear with respect to their status as an independent contractor.
A number of requirements must be met before your interim reaches reach the threshold of independent contractor status. To name a few:
The more you require your interims to engage in the actives of employees; things like requiring them to attend out of scope meetings, the higher your risk that the IRS may subsequently find that they were not independent contractors and subject your organization to payroll tax liability and overtime claims that you did not anticipate.
Time and again, I have been required by hospital personnel departments to go through all of the clearances and sometimes orientation of employees. Then I get invited to every meeting in the organization. All of this increases the client’s risk while wasting my time. I have asked the person that executed my contract to screen and approve meeting requests to insure that I am able to stay on task and that the rest of the organization understands my roles and its limitations from their perspective.
I tell clients that regardless of the number of hours they pay for, they receive 100% of my mental capacity virtually 100% of the time. I find it difficult if not impossible to mentally divorce myself from the needs and issues of my client whether I am ‘on the clock’ or not. Because of this, flexibility of hours should not be an issue because when I am engaged, I am always working for the benefit of my client. That said, I assure my client that regardless of the ‘normal’ schedule we agree to, I endeavor to make myself available on-site as needed. This means spending weekends in the client’s city and/or traveling on behalf of the client for matters not related to Interim services commuting.
Take another look at my article about how to find an interim. The effort you expend to locate a ‘free agent’ Interim Executive is worth the trouble. My prediction is that you will thank yourself for taking charge of what should be expected to be one of the most important decisions you may ever make because of the potential of a well conceived Interim Engagement to be favorably transformative in your organization.
If you are a Board member or a CEO and you do not know where to start or how to go about finding an Independent Interim, get in touch with me and I will give you some pointers.
So you want to be the CEO of a hospital or a health system.
Here’s the first thing to know: Like it or not, the role of acute care is slowly being relegated.
It’s still important, and it’s still a high-reimbursement area, but specifically because of that, scores of people and companies are trying to figure out how to use it less.
As a result, even in organizations where acute care represents the lion’s share of revenue, the competencies of today’s successful CEO range far from the acute-centric skills many hospital and health system executives and boards once prized.
All of today’s CEO candidates have to understand the critical interactions between the inpatient and outpatient realms, and the fact that delivering value rests on managing those interactions, not from maximizing patient census and inpatient days.
“Running a health system is about trying to provide coordinated care in an environment that’s patient- and family-centric,” says Jim King, senior partner and chief quality officer with Witt/Kieffer, a healthcare executive search firm.
Given the need to reduce reliance on acute care services, leaders who want to be CEOs have to learn skills applicable to the rest of the patient’s healthcare journey.