Find the Right Pace for Innovation

For instance, he offers up the Kaiser model, under which payer, provider, and hospital are under the same business entity. It can work, he says. But what about the vast majority of leaders at hospitals and health systems that have no hope of duplicating the Kaiser model?

"It's not so easy to do in communities where docs remain independent, and this is particularly true on the specialist side," he says. "They spend 90% of the money inside the hospital, and they're not thinking about whether there are less expensive alternatives to doing what they need to get done."

In the short term, he says, the majority of senior leaders he works with are trying to figure out a way to manage through on their own by cutting costs and becoming more efficient. And increasingly, their simple target is coming up with a game plan that manages their average cost per case to Medicare-level reimbursement rates.

"That's the strongest thing they can do in the short term," he says. "Some of the more strategically advanced systems are integrating clinical process improvement driven by the physicians as a way to drive down costs."