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Stimulus Relief is a State of Mind

Carrie Vaughan, for HealthLeaders Media, February 20, 2009

Take your finger off the pause button. The mere fact that the $787 billion stimulus package was signed into law on Tuesday will give some healthcare CEOs the confidence to move forward on some of their strategic priorities that have been on hold since the economy collapsed this past fall.

Of course, those organizations will likely be the ones that have cash reserves, can access the credit markets, and have a strong operating margin. The remaining hospitals may decide to wait until all the details of the American Recovery and Reinvestment Act are hashed out. In the $19 billion health IT component, for example, what will "appropriate use" and "meaningful user" really mean? It will likely take a few years for terms of the legislation to be defined—even if everything goes according to plan—but when was the last time in healthcare that the implementation of a federal law went smoothly?

At minimum, there's a two-year wait before healthcare organizations will see meaningful results from the stimulus, says Jeff Bauer, PhD, a Chicago-based management consulting partner with ACS Healthcare Solutions. "I'm concerned about the CEO who says this will solve my problems if we just wait for it . . . CEOs don't have two years to wait."

Management certainly must react to short-term pressures; what good is the stimulus if you aren't around in two years to receive any funding that might come your way? But organizations that understand how the stimulus fits into their long-term strategic purpose will be the institutions that in one, two, or three years have advanced more than those who have only focused on immediate crises, says Susie Krentz, director of private healthcare for the Noblis Center for Health Innovation.

The law may offer some relief from immediate challenges like declining revenues and the increasing ranks of uninsured. The Medicaid supplemental funding and $19 billion earmarked to pay up to 65% of COBRA premiums for laid-off workers should take effect fairly quickly—again, if all goes according to plan. This will enable more people to afford the COBRA option and keep them off the Medicaid roles and out of the uninsured ranks—a definite boost to the bottom line for hospitals and health systems. Of course, there is still the concern about whether enough people will be able to pay their share of the COBRA premium.

State of mind
Perhaps the biggest impact of the law will be the psychological component. The stimulus may change the "sense of dire uncertainty" to a slightly stronger comfort level where healthcare executives think that they can move on some strategic priorities, says Krentz. "Just the sense that this is out there is fairly significant."

For example, organizations that had a three-year IT plan but pushed it to a six-year plan because of the recession may move the IT plan back up the priority list because the stimulus should help provide resources on that front in a few years, she says.

Similarly, if the broader stimulus plan actually frees up the credit markets, it would allow healthcare organizations that still have some economic wherewithal—their operating performance is strong and they are a good credit risk—to access capital and move forward aggressively with projects that they had put on hold or take advantage of some new opportunities, says Krentz. "It might give a quicker impact on hospitals than some of these other funding sources because of the timing in which they can occur."

Ultimately, the stimulus' impact on an organization's strategy depends largely on tolerance for risk. "Risk and reward go hand in hand, so organizations that have the culture and economic capacity to take risk stand to benefit at the end of the day when things shake out in two or three years," says Krentz.

The majority of hospital leaders are probably still digesting the initiative and making sure their organizations are as efficient as possible. But healthier institutions and those that are comfortable with the nature of risk will likely start moving their strategic initiatives ahead sooner than later. What does that mean for healthcare institutions that have shaky finances and can't move forward? Find a partner, says Bauer.

One thing is certain: You don't want to be left behind.


Carrie Vaughan is leadership editor with HealthLeaders magazine. She can be reached at cvaughan@healthleadersmedia.com.
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