Cross Purposes

Isn’t it odd that an entity like a nonprofit hospital survives financially by keeping people in hospital beds while its stated goal is to keep people out of them?

It’s true. Check the mission statements of any number of nonprofit hospitals and you’ll find various ways to say that the hospital’s goal is to promote wellness and restore health. That’s admirable, and in an ideal world it’s what hospitals should be in the business of doing.

In other words, they should be cutting their own financial throats.

But this is not an ideal world. Far from it. People don’t take care of themselves. People shoot each other, beat each other, and get sick through no fault of their own. Lots of nasty things happen that are decidedly not contributing to the community’s health, and clinicians have to do their best to fix those mistakes. Hospitals exist for many very good reasons, after all.

And despite the fact that hospitals would like to believe that they can eventually decrease the need in their communities for acute- and intensive-care beds, the need in most areas doesn’t seem to be decreasing. And the mission statements, despite the fact that they seem to be working against the prospects for the financial health of the hospital, don’t change.

And they shouldn’t.

I was having a casual conversation recently with a friendly hospital CFO, and after we talked baseball, we talked healthcare.

“We talk too much about national health insurance and not enough about health,” he said.

“But isn’t that bad for business?” I blurted out, thinking of the irony of hospitals’ margins being dependent on sickness while their mission’s stated goal is to help people be healthier.

“Our goal is not to fill beds,” he retorted. A little light went on in my brain, then promptly went out, and I repeated the question. “But isn’t that how you stay in business?” 

“Our goal is to have a healthy community,” he said. “It's not our business model and that's not how our top line works. But that is our mission.”

“So your mission and your business model conflict,” I said, getting it.

“We'd be delighted to go out of business for the right reason,” he said, anticipating my next dumb question.

But we both know that’s not likely to happen. There will always be sick people—people who can’t be taken care of in your local ambulatory surgery center or walk-in clinic. But that doesn’t mean hospital leaders can’t work hard to achieve their mission while doing their best to improve their margin.

Smart hospitals are trying to better align these competing values by sponsoring healthy initiatives in their community or diversifying their income stream so that they’re not totally dependent on the super-sick to make it financially. I’m talking about sponsorships of healthy activities and financial support for other local nonprofits aimed at improving health. Further, some hospitals are diversifying their income stream to include less acute service lines, if you will, such as retail clinics, wellness centers and rehab facilities, just to name a few examples. That’s what this CFO is trying to lead his organization to do.

Leaders who make it a priority to embrace such strategies are showing that in a world of gray, despite the fact that the two goals of mission and margin are often at cross purposes, they’re not mutually exclusive.