Tag Archives: Health System

More examples of what not to do AKA how to stay in the frying pan and not fall into the fire.

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More examples of what not to do AKA how to stay in the frying pan and not fall into the fire.

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This is the second article in the series about what not to do.  The person suggesting this article asked for examples of things that might help you save yourself from yourself.  Please send me your examples and stories of things not to do.  Your confidentiality will be protected unless you want credit for the idea.  Sharing this experience, especially with younger executives is one of the best ways to serve the industry.  I have an outline of a third article and depending upon response, I could probably keep this going for a while since like a consultant friend of mine used to say, “One idiot can keep three consultants busy forever.”

Project planning

Ben Franklin’s adage goes, “Failing to plan is planning to fail.”  I have found this profound simple statement to be true time and again.

After being appointed interim CFO in a hospital, I learned that there was a major construction project under way.  The project and the rate at which the hospital was burning money on the project did not make sense to me.  To make a long, complicated story short, no one could produce a feasibility study to support the project’s value proposition or pro-forma analysis to support the project’s underlying  financing.  When no one could produce a sources and uses of funds analysis, I spent a couple of weeks creating my own from scratch.  When I was finished, it was clear that the project was underfunded by over $20 million and the hospital did not have sufficient reserves to cover the shortfall.  When this information was provided to the Board, after they recovered from the shock and horror, they decided to stop the project that would have resulted in a default in the bonds by drawing reserves below bond covenant minimum requirements triggering a technical default.  The entire organization was oblivious to this looming disaster.

Ole Abe said that, “You should spend twice as much time sharpening your axe as you spend cutting with it.”  The implication of this admonition is obvious to anyone that has ever cut wood with an axe.  Still and yet, executives let distractions and competition for their time lead them to allow ill-conceived initiatives to go forward then they are surprised when the projects blow up on them.  If you want to entertain yourself, pick any executive out at a cocktail party and ask them if they have ever seen a project go bad.  The war stories you will hear are spectacular. Better yet, ask the ‘expert’ if they have ever seen a peer do something stupid.  Apparently, they have not heard or have disregarded the advice of Einstein, “Doing the same thing and expecting a different outcome is the beginning of insanity.”

Project control

Oh boy!  The easy part of a project is the planing and approval.  The hard part is execution.  There are a lot of challenges with project execution.  One is that other unanticipated confounding priorities arise in the organization that bleed capacity from the organization’s leadership to remain focused on a critical project.  Another commonly seen problem with project execution is the loss of key leaders during the course of the project.  All too frequently, critical assumptions underlying the project’s rationalization are proven inaccurate or incomplete once execution begins.  Sometimes, a project’s success is largely dependent upon one person and if that person leaves or is incapacitated, the entire project goes into jeopardy.

To some degree, a project is analogous to a marriage.  In order for it to succeed, more than 100% commitment is required from all sides.  Every effort you make to manage your risk can be thwarted by uncontrollable changes in your business partner(s).  There is no guarantee that the people that sold a deal and made commitments on behalf of your business partner will be around to honor those commitments.  If they made commitments that were not in the contract, they may not be allowed to honor them.  More than once before a project was completed, I have found myself dealing with an entirely different cast of characters.  What about a business partner that gets acquired during implementation and none of the commitments made before the acquisition are honored?  A business failure or overcommitment by a business partner can move into your life like bad in-laws.  This is why business partner selection is so important.  Too often, a decision maker will chose a business partner based on cost alone and in the process buy himself a set of problems that turn out to be exponentially more expensive than the most expensive option that was under consideration at the time the decision was made.

A project does not have to fail to become a disaster.  Delays in a project can be as damaging.  I do not know of a delayed project that resulted in a better outcome.  Sometimes, delays cause cascading problems.  Take a construction project for example where the electrical contractor is contracted to start on a date certain and the project is not far along enough for them to begin work.  This kind of a delay can rapidly spread throughout an organization and create enough problems to overwhelm the ability of the leadership team to address them.  This is the reason you were required to study PERT in school.  How often do you see it applied in practice?

If a mistake is to be made in project management, it should be biased in favor of overcompensation for potential problems.  I am regularly criticized for being too conservative and too hard on pro-forma analysis assumptions. Never the less, time after time I see projected revenues and time lines being overstated and projected expenses understated.

Waiting too long to intervene

I have watched executives demur from engaging an issue in hopes that it would go away.  I have rarely seen this strategy work.  More often than not, a problem in an organization will get worse the longer intervention is delayed.  There are a lot of reasons that this occurs not the least of which is that addressing operational problems most often involves dealing with a personnel problem.  I do not know many executives that enjoy taking on a personnel problem.  Vince Lombardi said, “Hope is not a strategy.”  Failing or refusing to intervene can allow a problem to become exponentially more damaging until it reaches the point that the organization’s financial statements are impacted.  Time and again as an interim, I have been asked, why it was going to take so long and cost so much to address a problem?  I have seen ten or more interim executives committed to address what had been allowed to become a major business problem on more than one occasion.  My answer to this question is always the same.  Cutting costs after an organization finally decides to address a problem only prolongs the time and cost necessary for the mitigation.  All too frequently, organizations create a problem by under-resourcing an area or initiative.  When this leads to a melt-down, the leaders charged with the mitigation are frequently frustrated by the cost and time associated with fixing the resulting mess.  Sometimes, I have to tell them for their future reference that the cost associated with keeping a process or function under control is always a small fraction of the time and resources necessary to straighten it out after it goes catawaumpus.  Every executive I know can relate one or more horror stories to prove this point.  More often than not, the fiasco is related to an I/T implementation where the costs and operational consequences associated with a failed project can exceed the original budgeted cost of the project.

Fire fighters are known for over-commiting resources to a fire.  This strategy is designed to err on the side of having more resource than is needed to address the fire as opposed to running the risk that a growing fire will overwhelm the resources that are available on site.  Once, I asked an interim CEO how it was going relatively early into his engagement in a very troubled large hospital.  His answer that I have never forgotten was, “The platform is on fire.”  A platform is like a ship.  When it catches fire, getting off is rarely an option.  You must fight the fire where it is and failure is not an option.  Remember the USS Forestall?  Skimping on resources when dealing with a problem like this can lead to figurative death in the form of an unplanned career transition.  A business problem is analogous to a fire in the organization.  If you are going to make a mistake addressing a problem, your personal risk will be much lower if you respond aggressively to a problem and err on the side of over-commiting resources until the problem is resolved and the situation stabalized.  The alternative is a potential conflagration.

Non-evidence based decisions

The mantra of UAB’s Doctorate of Administration in Health Sciences program is, “Evidence based practice in Healthcare Administration.”  I have commented before on what appears to be a paradox in healthcare.  On the clinical side, most of what is done is based on evidence gained from objective, peer reviewed research.  The purpose of the research is to yield better outcomes and safer facilities for patient care.  In the administrative suites of too many healthcare organizations, decisions are routinely made based on seat-of-the-pants hunches, little or no analysis, ridiculous assumptions, no assumptions, flawed analysis, systematic ignorance or reckless disregard of applicable evidence and research.  More often than not, harried administrators do not even bother to see if any applicable research is available.  In other cases, decisions are made for political expediency or to appease Dr. Huff-and-Puff.  I got into trouble in a Catholic hospital for suggesting the leadership team’s decision making ranged from magic eight ball to Ouija board.  I now keep a magic eight ball on my desk as a reminder to not fall into this trap.  It is funny to have younger people ask me what the magic eight ball is. They’re not old enough in some cases to have ever heard of the magic eight ball and they are fascinated to see how it works. It is a wonder some organizations get along as well as they do.

Indecisiveness
I was perusing novelty signs in a gift shop in Indiana when a sign captured my attention.  It said, “Decision making around here is like a squirrel crossing the road.”  Indecisiveness can be dangerous when it is practiced in the front office.  At its least, indecisiveness can lead to project and initiave delays.  At worst, it can wreck not only projects but the credibility of executives with their Boards.  There’s a one liner that says, “The road to failure is littered with run over squirrels.”  In an earlier article I said, “If you are a decision maker, make a decision.”  Not making a decision is making a decision.
As before, I would like to thank Dr. Christy Lemak Professor and Chair of the UAB Department of Health Services Administration for the inspiration or should I say assignment that resulted in this article. I am looking forward to seeing my grade.
Please feel free to contact me to discuss any questions or observations you might have about these blogs or interim executive services in general.  As the only practicing Interim Executive that has done a dissertation on Interim Executive Services in healthcare in the US, I might have an idea or two that might be valuable to you.  I can also help with career transitions or career planning.
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This is original work.  This material is copyrighted by me with reproduction prohibited without prior permission.  I note and  provide links to supporting documentation for non-original material.
If you would like to discuss any of this content or ask questions, I may be reached at ras2@me.com. I look forward to engaging in productive discussion with anyone that is a practicing interim executive or a decision maker with experience engaging interim executives in healthcare.

The Latest Motion In House v. Price Has A Significant Impact On The Future Of CSR Payments

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http://healthaffairs.org/blog/2017/08/01/the-latest-motion-in-house-v-price-has-a-significant-impact-on-the-future-of-csr-payments/

On August 1, 2017, the United States Court of Appeals for the District of Columbia granted the motion of the attorneys general of 17 states and the District of Columbia to intervene in House v. Price. House v. Price is before the D.C. Circuit on appeal from the ruling of a district court judge in favor of the House of Representatives in its lawsuit claiming that the reimbursement of insurers for reducing cost sharing for low-income qualified health plan enrollees is illegal because Congress had not appropriated funding for the payments. The judge enjoined the payments but stayed her order pending an appeal and the Obama administration in fact appealed. The states had moved to intervene, claiming that they had an interest in the action and that the Trump administration was not adequately defending their interest.

The three-judge appellate panel held first that the states had demonstrated that they had standing to intervene because they “would suffer concrete injury if the court were to grant the relief the plaintiffs seek.” The states established that a judgment for the House terminating the payments would “lead directly and imminently to an increase in insurance prices, which in turn will increase the number of uninsured individuals for whom the States will have to provide health care.” This would in turn result in state-funded hospitals suffering financially when they have to cover emergency care for uninsured individuals.

The court further held that the states had established a right to intervene in the action. First, the states had established an interest in the subject matter of the lawsuit.

Second, the court held that allowing the injunction of the court below would impair the states’ rights. The court observed that the administration’s “claim that it could unilaterally suspend payments is a debated legal question, not an answer to the injury the States have evidenced. The injunction sought, which would forbid the payments at issue, would erect a roadblock to the States’ goal of either persuading or compelling the Department to make the payments.”

Third, the court held that the states had raised a sufficient doubt concerning the adequacy of the administration’s representation of their interest. The court noted that the administration had nowhere argued that it would protect the states’ interest or continue to pursue the appeal.

Fourth, the court held that the motion to intervene was timely. The states, the court held, “had filed within a reasonable time from when their doubts about adequate representation arose due to accumulating public statements by high-level officials both about a potential change in position and the Department’s joinder with the House in an effort to terminate the appeal.” The court, in short, took President Trump’s threats to terminate the cost-sharing reduction (CSR) payments seriously.

Finally, the court held that permissive intervention was also warranted in the case.

The court further ordered that the case would continue to be held in abeyance, with status reports at 90-day intervals and the next one due on October 30, 2017. With their status as parties to the case, however, the states may well next seek to get the case moving again.

The decision does not mean that the Trump administration is barred from ending the cost-sharing reduction payments. It does mean, however, that the administration cannot unilaterally stop the CSR payments, dismiss the appeal, and claim judicial imprimatur for its doing so. If the administration does stop making the payments, the states—or insurers, or possibly consumers—would be able to sue to require the payments to be made and the injunction entered by the lower court would not be as much of a “roadblock” to their prevailing. Finally, if the states ultimately convince the appellate court that the CSR funding has in fact been appropriated, the administration would be required to pay it. The decision is, therefore, a major development in the ongoing CSR saga.

29 hospital, health system outlook and credit rating actions in July

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http://www.beckershospitalreview.com/finance/29-hospital-health-system-outlook-and-credit-rating-actions-in-july.html

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Brigham and Women’s may extend buyout offer beyond initial 1,600 employees

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http://www.beckershospitalreview.com/hospital-management-administration/brigham-and-women-s-may-extend-buyout-offer-beyond-initial-1-600-employees.html

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Boston-based Brigham and Women’s Hospital may ask more employees to voluntarily leave their jobs just three months after offering buyouts to 1,600 employees, according to The Boston Globe.

“We are considering a respectful way to minimize any potential involuntary reduction in force by inviting some employees who may wish to leave the Brigham to voluntarily separate from the organization,” the hospital said in a statement to The Boston Globe. “When we announced the voluntary retirement opportunity in April, we indicated that additional reductions in force would likely be necessary.”

When Brigham and Women’s announced the buyout offer in April, the organization said it is profitable but facing pressure amid shrinking payments from government and commercial insurers and growing labor costs. Buyouts were only offered to employees age 60 or older. The offer includes one year of base pay and health insurance for up to 20 months.

About 45 percent of those eligible have applied for the buyout, according to The Boston Globe.

A hospital spokesperson told The Boston Globe the hospital hasn’t decided how many and which employees to extend the buyout offer to.

Brigham and Women’s is owned by Boston-based Partners HealthCare and has approximately 18,000 employees.

Fitch: Failed ACA replacement efforts add to healthcare sector uncertainty

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http://www.beckershospitalreview.com/finance/fitch-failed-aca-replacement-efforts-add-to-healthcare-sector-uncertainty.html

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As ACA repeal and replace efforts stall, significant uncertainty remains surrounding how federal policy will affect nonprofit healthcare organizations, leading to a negative sector outlook for healthcare, according to Fitch Ratings.

The uncertainty and negative outlook comes as the Trump administration looks for ways to weaken the ACA even if the health reform law is not repealed.

Nonprofit hospitals experienced declines in uncompensated care under the ACA because of an increase in healthcare coverage due to Medicaid expansion, rollout of healthcare exchanges and allowing children to stay on their parent’s health insurance plan until age 26.

While repeal efforts cause uncertainty for hospitals, current discussions regarding a bipartisan healthcare bill could be beneficial for nonprofit hospitals. A bipartisan effort could potentially reduce the insurance premium price hikes, according to Fitch.

55 hospital transactions and partnerships in July

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http://www.beckershospitalreview.com/hospital-transactions-and-valuation/55-hospital-transactions-and-partnerships-in-july.html

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5 latest hospital, health system CFO moves

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http://www.beckershospitalreview.com/hospital-executive-moves/5-latest-hospital-health-system-cfo-moves-080117.html

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The following hospital and health system CFO moves were reported by Becker’s Hospital Review since July 20.

1. Dallas-based Parkland Health and Hospital System named Richard Humphrey executive vice president and CFO.

2. Providence St. Joseph Health, the organization formed through the merger of Renton, Wash.-based Providence Health & Services and Irvine, Calif.-based St. Joseph Health, named Venkat Bhamidipati executive vice president and CFO.

3. Dennis Laraway, executive vice president and CFO of Houston-based Memorial Hermann, will join Phoenix-based Banner Health as CFO on Sept. 29.

4. Gainesville-based Northeast Georgia Health System named Brian D. Steines as its new CFO.

5. Albuquerque, N.M.-based Presbyterian Healthcare Services appointed Roger Larsen senior vice president and CFO.

5 hospitals with strong finances

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http://www.beckershospitalreview.com/finance/5-hospitals-with-strong-finances-080117.html

Here are five hospitals and health systems with strong operational metrics and solid financial positions according to recent reports from Fitch Ratings, Moody’s Investors Service and S&P Global Ratings.

Note: This is not an exhaustive list. Hospital and health system names were compiled from recent credit rating reports and are listed in alphabetical order.

1. Coral Gables-based Baptist Health South Florida has an “AA-” rating and stable outlook with S&P. The system maintained key balance sheet metrics and generated better-than-projected financial results in fiscal year 2016, according to S&P.

2. Carolinas HealthCare System has an “Aa3” rating and stable outlook with Moody’s. The Charlotte, N.C.-based system has a track record of good financial performance, strong balance sheet metrics and a large scope of operations with multiple hospitals. Moody’s expects Carolinas HealthCare System to maintain stable leverage metrics while continuing to generate financial results at current levels.

3. Children’s Healthcare of Atlanta has an “Aa2” rating and stable outlook with Moody’s. CHOA is a leading provider of high acuity pediatric care in the Atlanta area and has favorable leverage metrics and a track record of strong margins and liquidity, according to Moody’s.

4. Cleveland Clinic Health System has an “Aa2” rating and stable outlook with Moody’s. The system has a track record of meeting operating challenges to sustain strong cash flow, exceptional fundraising capabilities, strong liquidity and a growing ability to leverage an international brand into revenue diversification, according to Moody’s. The debt rating agency expects Cleveland Clinic to manage execution risks of multiple strategies, as demonstrated in the past.

5. Broomfield, Colo.-based SCL Health has an “AA-” rating and stable outlook with Fitch. The system’s operating performance improved in fiscal year 2015, and SCL has sustained those results, according to Fitch. The system has manageable capital needs in the near term, a stable liquidity position and geographic diversity, with 12 hospitals in five markets across three states.

More Memorial Hermann execs to depart

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https://www.bizjournals.com/houston/news/2017/07/31/more-memorial-hermann-execs-to-depart.html?lipi=urn%3Ali%3Apage%3Ad_flagship3_feed%3B5bILEwnxSM%2BkK22A0oNGSA%3D%3D

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Three more executives plan to leave Memorial Hermann Health System, Houston’s largest nonprofit health care system, according to multiple reports.

Last week, Arizona-based Banner Health announced it hired Dennis Laraway as CFO, effective Sept. 29. Laraway has been CFO of Memorial Hermann since 2011.

Following the announcement, Modern Healthcare, Healthcare Finance and others reported that two other executives plan to step down. Memorial Hermann spokeswoman Alex Loessin confirmed to the publications that Christopher Lloyd, CEO of Memorial Hermann’s physician network, and Jim Garman, chief human resources officer, also plan to leave. That’s in addition to Craig Cordola, president of Memorial Hermann Health System’s west region, whose departure was announced earlier this month.

The reports did not specify when Lloyd and Garman will step down or what their next positions will be. Cordola, however, will become senior vice president of St. Louis-based Ascension Healthcare and ministry market executive of Ascension Texas, effective Sept. 1. Memorial Hermann is evaluating a successor for Cordola internally, Loessin previously told the Houston Business Journal.

“Career moves by top leaders to other signature health systems speak volumes about the caliber of talent we have at Memorial Hermann,” CEO Chuck Stokessaid in a statement to the publications last week. “While we will miss the contributions of these individuals to the organization, I’m incredibly proud of all they accomplished, and I wish each of them the very best. We have a strong management team at Memorial Hermann and excellent support from our board.”

Stokes was named CEO for Memorial Hermann in early July. He had served in an interim capacity for a few weeks after Dr. Benjamin Chu abruptly stepped down from the position June 19.

Trump’s threats to end CSR payments may mean hospitals will see a rise in uncompensated care costs

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http://www.fiercehealthcare.com/finance/trump-s-threats-to-end-csr-payments-may-mean-hospitals-will-see-a-rise-uncompensated-care?utm_medium=nl&utm_source=internal&mrkid=959610&mkt_tok=eyJpIjoiT0RKaVpETTRORE5sTURNeSIsInQiOiJ0QlwvRURDeTZRRnpcL2g1eVp4ek4yVTgwM3hcL1lqcjVJdzlqcER3S0JMbFpcL3FwVzI4VEhkYktjWDdiZ3VRcTdBVVZmMml0cHIrc3lrRmhTYWlcL1wvaVRTZTA5VlczZ3I3Z3JkN0FYYTI4VWlJb3grTXZ2UDA5XC9hVTVVN2M3U2UxT3gifQ%3D%3D

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Hospitals had better brace themselves for a possible rise in uncompensated care costs if President Donald Trump makes good on an implied threat to end cost-sharing reduction payments to health insurers.

Trump indicated on Twitter this weekend that he may end “bailouts” for both insurance companies and Congress. Those bailouts refer to CSR payments, which subsidize the out-of-pocket healthcare costs of low-income Affordable Care Act exchange customers.

And if he follows through and decides this week to end those payments, the individual marketplaces could see disastrous consequences. And that means doctors and hospitals may see a spike in uncompensated care costs and bad debt, reports Forbes.

Hospitals have seen a drop in uncompensated care costs and bad debt in the years under the ACA. A recent Politico report found that spending on charity care at the top seven hospitals in the U.S. dropped from $414 million in 2013 to $272 million in 2015.

Furthermore, a recent Kaiser Family Foundation report said that if the CSR payments are withheld, premiums for silver plans would rise by 19% and more payers will likely leave the marketplaces. Doctors and hospitals are concerned that means millions of patients who have purchased insurance through the ACA exchanges won’t be able to afford their out-of-pocket costs for care.

And they have reason to be concerned, Marc Harrison, M.D., president and CEO of Intermountain Healthcare, which operates nonprofit hospitals and clinics and insures more than 800,000 people in Utah, told NPR. Without the CSR payments, rate increases will likely skyrocket. “We’ll see [the number of] people who are uninsured, or functionally uninsured, go way, way up,” he said.

“The American people need this funding to lower what they pay for coverage and be able to see their doctor,” Kristine Grow, a spokeswoman for America’s Health Insurance Plans told Forbes.