4. Flatten your organization: Healthcare organizations have become too hierarchical, which has led to increased costs, diffuse communication, slow pace of change. When Jack Welch was reinventing General Electric he went to great efforts to reduce layers of management in the organization. He felt that every layer was a problem that resulted in poor communication, delayed action, and increased costs. Sound familiar?
Recommendation: Remove as many layers as possible between the CEO and the employee to decrease costs and to increase organizational efficiency.
5. We cannot be all things to all people: Historically healthcare organizations were founded to meet the needs of the community. Over the years this mission translated into many communities having duplicative services, such as open-heart surgery, obstetrics, bariatric surgery, etc.
Recommendation: If a service is available to the community (locally or regionally) from another healthcare organization and if the service in your organization is underperforming in quality and finance, then the service should be eliminated. For example, 12 hospitals have closed their obstetrical services in the past decade in the Philadelphia region due to poor reimbursement, increased malpractice expense and decreasing volume. The result is more deliveries are done at fewer facilities which has ultimately increased the quality of obstetrical care.
6. You are getting too heavy: Many hospitals are part of regional and national health systems which have been developed over the past 25 years. The original premise for joining a health system was to increase intellectual capital, to reduce overhead expenses and increase the ability to negotiate favorable supply and insurance contracts. While many of these objectives continue to be met, many of the member hospitals will not be able to sustain heavy funding for corporate support.
Recommendation: Health systems need to rethink their models and services to focus on where they most add value with a goal of reducing the cost needed to support corporate functions.
7. You can't shrink your way to greatness: A senior human resource executive shared this phrase with me as she was trying to convince the executive leadership of an international investment firm that cutting costs would not make the organization sustainable. The same is true in healthcare, where we also need to be thinking of growth of existing and new business opportunities. An organization well-known for its innovation, 3M, has had a goal that over a five-year period 30 percent of all revenue must come from new products and services.
Recommendation: Growing the revenue line with new ways of providing existing services and innovative new services will be the path to future success.
8. Become experts in chronic care: It is estimated that a significant percent of the healthcare dollar in this country is spent on chronic care. Under the old rules this was a good for hospital revenue since readmissions and diagnostic workups for conditions like congestive heart failure, diabetes etc. would be paid on a per-occurrence basis. That will change under healthcare reform and organizations that become experts in managing chronic illness outside of the costly inpatient environment will become clinically and financially successful.
Recommendation: Prepare and position your organization to explore opportunities to partner with health insurance companies and self-insured employers to share the savings of caring for chronic illness in a more clinically effective and cost-effective manner.