Today’s Big Idea: There is emerging momentum to the idea that affiliating with a larger health system will not guarantee independent community hospitals or smaller health systems the market security or financial sustainability to serve their communities. Market dynamics for safer, lower cost of care delivered in an environment that patients really like seems to fly in the face of the mega systems. Community hospital boards and their CEOs say lack of agility or the ability to deliver care for less while engendering patient loyalty, is major weakness of many of the larger health systems. There are just too many conflicts of purpose, an increasing number of healthcare consultants are arguing.
The defenders of the big health systems and their founding theory that being part of a larger organization that can command more influence with third-party payors while capturing new patients through broadly dispersed physician networks, claim that independent healthcare organizations will not be able to survive, they will be lost in the battle of the market Goliaths and the consolidating health insurance business segment.
The supporters of independence say there is actually a way forward for hospitals with reasonable financial health and a passion to plot their own future.
To bolster the bigger is better and safer argument, health systems point to companies like Amazon as the role model for what happens through disruption— small and large providers alike are squeezed out.
But here is where I think the debate gets really interesting:
The Debate Gets Interesting
Yes, Amazon has put many traditional book sellers and some other retailers out of business, but they are not the Goliath that seemingly tries to do everything. In reality, says Susan Talton the CEO of Gray Analytics, Amazon is actually a company that focuses narrowly on one thing that it does very well — online retailing — and then they outsource almost everything else, not just to save money but to get the best of what they need immediately. Yes, they are big but in reality Amazon is just a nimble cloud of companies rather than a monolith with layers and layers of bureaucracy.
Instead of the Amazon model, most bigger health systems today apparently like to own and do almost everything themselves. That usually drives up the overhead assessment to member hospitals, a significant monthly payment that rarely benefits the physicians or their patients. Smart health system CEOs should change as quickly as possible. Here is why.
When you are trying to build a vertical in healthcare, that translates into excess costs for which payors, including Medicare and Medicaid, do not want to pay. There are clear indicators, although not a sweeping tide at this point, that they have every intention of reducing reimbursement for hospitals, physicians and other providers given the rising cost of Medicare courtesy of the 10,000 Baby Boomers who quality for the program each and every day.
For my perspective I think it is a better, not bigger way forward
Big Systems Lack Agility to Focus On Clinical Care
She points to efforts by health systems like Mayo Clinic, Partners Healthcare, HCA, Tenet and others who have sought to create economies of scale, or they have outsourced non-medical operations like food service, parking lots and maintenance. But, Ms. Talton argues, this does little to make them more agile in their core business of clinical care, and that is precisely where hospitals should be obsessively and narrowly focused. She believes that hospital executives should be constantly asking how their medical staff can best care for patients and then make investments and forge partnerships to make this narrow focus possible. Ms. Talton said that does not mean hiring more people to design a new cafeteria or to rearrange the deck chairs. What it means is to have an innovative and well-equipped medical staff with a clear mission, and a network of outside companies taking care of everything else and helping them achieve it, making everything else aligned with the care. That’s not just outside partners who do the work for less, it is outside partners who can help do it better, faster and make the patient experience and patient outcomes better. The hospital industry today is just not there yet, Ms. Talton believes. But the distant drum beat is growing louder.
Her essay tracks with a recent Black Book research report on trends in the outsourcing of clinical services, that we reported in mid-May. In the past, hospital leaders were OK outsourcing physician coverage for the emergency department, anesthesiology, radiology and, more recently, the hospitalist program. But now the trend is to outsource entire clinical departments to companies that can bring to the table the latest technology in diagnostic imaging, testing or even ICU monitoring equipment. Hospitals with a weaker balance sheet and more limited access to capital see outsourcing as a way to access the latest equipment and technology while zeroing in with their physicians on initiatives like value-based care.
In our Quote of Today feature on LinkedIn Facebook and Instagram, Ms. Talton argues that if there is a certainty about the Darwinian future of healthcare, it’s that those able to harness the possibilities of focus and technology will eventually prevail. If hospitals don’t figure it out quickly, the likes of Amazon and Apple will.
Now here are this week’s career management tips:
Career Tips for the Week
First, layoffs are and will continue to be a fact of life in healthcare. To avoid finding yourself on the chopping block, you should do three things and do each one of them well:
Finally today, build a network of people you would like to work for. When you invite them to connect on a social media platform, send a personalized note with the invitation explaining why you want to connect but please do not use the reason for the connection is that you want a job, at least not during the initial period of the relationship. And do not underestimate the value of sending a handwritten note if a member of your network is receives an award or is recognized for some great accomplishment. As George H. Walker Bush has said, “I got to the White House one handwritten note at a time.”
That’s it for this week. Don’t forget my blog tomorrow at johngself.com and our weekly video on Saturday morning at the John G. Self YouTube Channel.
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© 2018 John Gregory Self