In Healthcare Business Strategy, One Size Doesn't Fit All

Something I wrote not long ago struck a nerve with an advisor and source that I trust. That's not particularly unusual—they write to me all the time. But this one had a complaint phrased in the form of a question. And that got me thinking, because it cut to the very heart of why we do what we do.

It doesn't matter what the subject was, but, essentially, his complaint was that I interviewed a CEO whose hospital had not achieved a 2% operating margin in any of the past five years.

The complaint, while legitimate, was that executives who can't do significantly better than that are not the top performers in the industry, and certainly shouldn't be held up as an example of someone to emulate for leaders of other hospitals and health systems. I had reported on this person's resistance to embrace some of the restructuring work that other hospitals and health systems are doing as the healthcare business model shifts.

But I disagreed with my correspondent's contention that this was a poor choice of interview subjects. Maybe for this hospital, in this market, some of the investments surrounding ACOs, for example, or employing physicians, or acquiring affiliated healthcare providers, either were not right or were too expensive.

Certainly hospitals and health systems, even non-profit ones, must make a margin. But many of these executives have seen healthcare "revolutions" before, and they remember that some of those at the front of the curve suffered the most when the premise of the investments they made failed to ultimately pay off.