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Healthcare leaders have two choices as the industry begins its uncertain journey into an era of “reform” and reductions in Medicare and Medicaid funding.  They can embrace the changes and get out in front, or they can stand pat, waiting to see what actually happens and then adapt.

The latter modus operandi has gotten us to where we are today.  Healthcare leaders are, without question, the most adept adapters in all of business.  That is an exceptional talent. They figured out Medicare in the 1960s when many proclaimed it would wreck healthcare in America, they quickly mastered TEFRA and the flawed implementation of DRGs (physicians were excluded) in the 1980s, and they survived the Clinton-era Balanced Budget Act as well as a series of other revisions in the late 1990s. All the while most healthcare providers flourished.   However, this time around, I am just not sure that waiting and then adapting is the right option.

As an executive recruiter, I like CEOs who believe that survival means recognizing and “accepting” that healthcare providers will face a series of significant reductions in federal payments over the next 20 to 30 years.  They have accepted the fact that an increase in Medicare and Social Security spending will produce a deficit of nearly $2 trillion unless something is done.  These CEOs,  and their teams, and some physicians, are already at the table designing strategies for new, more cost effective ways to deliver healthcare while improving quality and safety. These leaders understand they are the nexus of real structural reform, not the federal government.

This is the reality of healthcare reform.  Congress is badly divided. Even if one party gains a big majority, some of the devilishly tough issues that must be confronted are best not decided in a forum that is subject to the extreme, sometimes irrational positions of a political base.

A very bright and insightful CFO of a major New Jersey medical center once told me, “We will have to find ways to reduce our costs on an ongoing basis that are at least seven to nine percent below what Medicare pays us or we will not survive.  I know it can be done.  I am not sure how at this point, but this challenge excites me like no other time in my career.” 

Making this paradigm shift is not a solo act.  I wonder what his CEO is thinking.  If he is a get-out-in-front leader who also is excited by this challenge, his hospital may be one of the survivors.

© John Gregory Self