The winds of change have reached unrelenting status for the healthcare industry. The disruption of our bloated, costly business model has begun. There will be major career consequences for those who are “disruption deniers.” Unfortunately their healthcare businesses and their employees will also suffer.
The truth is that we are all in this boat together — health systems, hospitals, home health and hospice companies and the vendors who support their work, including search firms. So I think we all should personalize this existential threat and ask: Are we a “disruptor” or are we a “disruptee?”
The vast majority of major health systems, hospitals and other providers fall into the latter category, I fear. Based on conversations with healthcare executives around the country, I have come to believe that for every two CEOs of traditional providers that are moving to be a disruptor in their market, there are eight who are hoping that this threat is simply overblown or will occur after they retire. Their hope is too often driven by their inability or desire to change the way business is conducted. Others must cope with skeptical medical staffs and/or cautious boards, requiring considerable energy to convince them that this change is real.
If you were looking for a pithy explanation of what healthcare will be like going forward, try this: Lower costs, improved quality, enhanced patient satisfaction and safety, and zero (or next to zero) readmissions. If you fall outside that pathway, you will pay a price.
Now to be fair, CEOs who get too far out in front of their skis in attempting to adjust to changing market conditions could also pay a price. Timing and strategic preparedness will be the key to success. However, if you sit back and think you will have plenty of time to adjust, the chances are that you will not. All the evidence shows that when trends finally kick into high gear it will be too late, especially for those healthcare organizations whose executives (and employed medical doctors) have a mindset that is firmly rooted in this is way it has always been. That was certainly the case for KODAK, once a powerhouse household brand of epic proportions. It was KODAK electrical engineer Steven Sasson who, in 1975, invented the first self-contained digital camera, but the company told the enterprising engineer not to discuss it outside the company. The company was locked into fierce marketing wars on film, paper and traditional cameras and were unwilling to consider the impact of this invention on their business model. By the time KODAK’s woke up realized it was sitting on a digital gold mine, it was too late.
For some in healthcare, the way forward to protect themselves (read: their careers) and their hospitals from this onslaught is to join a bigger system where they will have access to the capital necessary to compete in a rapidly changing environment. Unfortunately, this Kool-Aid strategy is more about “muscling up” to force the payors to maintain higher rates of reimbursement. Their strategy is to push for higher rates under threat that their beneficiaries will lose access to their quality (but costly) care. Right now the insurance companies win some concessions but mostly they cave to concerns from their beneficiaries who do not want to lose access to their doctor or their physician’s hospital of preference (read: employment). The problem is, and research supports this conclusion, that most health system mergers result in higher overhead which leads to higher costs, not necessarily a good position to be in when nimble disruptors enter your playing field. With the relentless pressure to lower costs, improve quality of care and enhance safety, being part of a bloated health system may be like trying quickly turn a 1,092-foot nuclear aircraft carrier like the USS George H. W. Bush in the 530-wide Houston Ship Channel. There is nothing nimble about that task. You probably will get bombed by disruption before you are heading in the right direction.
There is another side to disruptors. Being bigger is not always bad if your style and cost structure allows you to innovate and then move quickly. Smaller home care providers will face increase competition from national firms that are able to link their clients using remote monitoring and telemedicine to ensure more responsive care at a lower cost. How would you like to be a traditional home health provider who finds out that this new model is taking your patients Smaller boutique hospitals, like the lower cost “focused factories” that Harvard Professor Dr. Regina Herzlinger wrote about in her 2007 book. One of the health systems that is testing the waters of disruption is New York’s Mount Sinai Hospital. Their innovative Hospital At Home is producing better results in terms of quality care and patient satisfaction at lower costs.
In one of my recent Saturday morning video blogs on adapting to change, I mentioned a new job in healthcare: Chief Mindset Officer. That may turn out to be one of the most necessary and thankless jobs in recent history.