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On Thursday I spoke to the Texas Organization of Rural and Community Hospitals (TORCH) near Austin.  I spoke about the importance of empowering employees, a strategic imperative for navigating the very challenging times that lie ahead for hospitals and other healthcare providers.  Sorry for the delay in  filing this post, but this was an enlightening experience.  I left the conference center convinced that my projections — and those of many others who are far more wiser than me — that the perils that lie ahead for healthcare organizations (no fault of the recent health [payment] reform measure) are spot on.  As I drove back to Dallas, I kept thinking about the challenges that CEOs will face.


Hospital Chief Executive Officers have a tough job.  Over the next seven to 10 years, it will become a great deal more difficult.  Here is why….

There is no way the healthcare industry can avoid significant reductions in Medicare reimbursement.  With 78 million people flooding the program over the next 20 years we are looking at deficits of nearly $2 trillion in Medicare and Social Security alone.  Even if Congress reins in spending on discretionary programs — and that is a gigantic "IF" — the federal government still will not be able to afford the social safety net promises that it has made to senior citizens.  We are already borrowing money to pay some part of Medicare payments now.

Reductions in reimbursement will mean that hospitals — not Congress — will be forced to develop plans to restructure how care is delivered more cost effectively with a higher rate of quality and safety.

Making those painfully tough decisions is not a solo act.  Hospital CEOs will need the support of their boards, leadership teams, employees and physicians.  They must all work together in a common purpose — with a shared vision and a combined willingness to make sacrifices.  In other words, the CEO must empower his executive team colleagues, board members, employees, physicians and community stakeholders to work together to make these really hard, wrenching decisions.  

The good news is that they have seven to 10 years before the real deep financial crunch hits.

Empowering employees and stakeholders is the most effective way to leverage an organization's most important asset to deal with these challenges, but it is not an overnight process.  There will be the inevitable push back, the blind resistance to change based on a passionate hope-against-hope belief that somehow this country's financial problems are not as serious as is being reported and that it will somehow all work out.  It won't.

As CEOs face these incredible challenges, they must also keep their eyes on strategies for maintaining their hospitals as respected, trusted community assets. 

Remember all this the next time you read a news story with an attitude – indignant about hospital CEO pay.  Are there excesses?  Yes.  But by and large these leaders are grossly underpaid, and no where more than in rural and smaller community hospitals.

© John Gregory Self


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