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.
As an organization dedicated to peer-to-peer learning and insight, my colleagues and I are tasked with bringing our readers in-depth, practical solutions from people across the country who are responsible for tackling the difficult transformational work required to make healthcare safer and more efficient.
That work requires us to be always persistent and skeptical, but also to be available to consider many different solutions to problems. And that includes the wait-and-see approach.
Healthcare executives are overwhelmed with regulatory changes, not to mention the drastic stresses that are now being placed on the traditional healthcare delivery model.
Some are early adopters.
Generally, they embrace the changes and look to invest in technologies that they think will make their work safer and more efficient, and which will eventually translate to the bottom line. But there is significant risk involved in being an early adopter.
Others are not as inclined to risk-taking and definitely have less available to invest in new ways of doing things.
We struggle with this editorially. Most of the executives we speak with for stories in the magazine, for our research reports, books, roundtables and Breakthroughs reports, are innovators. We know our readers want to see what's new, who's taking risks, and how much, how other executives expect those risks to pay off.
Healthcare requires innovation, so the early adopters and industry leaders in finance, patient experience, ACOs, patient experience—the list goes on and on—are usually the ones we speak with most. But that doesn't mean that others who aren't moving so fast aren't being prudent.
The innovators have a story to share, but the watching and waiting perspective is also valuable, and probably is more in line with the majority of our readership. It's our job to reflect the diverse opinions of our audience-—whether or not we agree that their strategic approaches are the right choice.
Of course, my friend is right about the operating margin. Less than 2% over the long term is not likely to ensure the long-term stability of an organization. But let's say I eliminated speaking and reporting on hospital executives who achieved less than a 2% annual margin.
That would preclude me from talking to the CEO of Fairview Health in Minneapolis, Mark Eustis. At the recent American College of Healthcare Executives Congress, Eustis shared that Fairview recorded a margin of just around 1% for 2011. Certainly long term, a 1% margin isn't going to cut it, and Eustis knows that. He's taking risk though.
Fairview is embracing many of the most talked about aspects of healthcare reform, from joining the CMS's Pioneer ACO program to signing long-term risk-based contracts with commercial insurers. Essentially, Eustis is cannibalizing some of his system's potential fee-for-service revenue to be well-positioned for the future. But that doesn't necessarily mean he'll be right.
We're available to talk with any hospital, health system, physician practice, or health plan executive who is trying to address the very real issues we have in this country, whether we agree with their approach or not.
Debate about these potential improvements is crucial. It's the only way we'll make progress. Our job is to show you the depth and breadth of the choices available, with a dollop of perspective. It's your job to decide which approach is best.
Philip Betbeze is the senior leadership editor at HealthLeaders.