Strategizing for these priorities is a must for leaders of hospitals and health systems to address their biggest pain point.
Rethinking and retooling approaches to the workforce as a hospital CEO right now isn’t just smart, it’s necessary.
The workforce is evolving in several ways, from newer generations becoming a wider base to how the work itself is done, forcing leaders to constantly consider and implement solutions designed to keep employees for the long haul.
Here are three aspects of the workforce CEOs are targeting at next week’s HealthLeaders Workforce Decision Makers Exchange, where hospital executives will come together to share best practices to combat the top threat to their organizations.
Recruiting and retaining younger generations
Regardless of what your organization is trying to achieve, it won’t be possible without the ability to bring in and maintain talent.
The workforce shortage may not be as dire as it was during the height of the pandemic, but it continues to be a thorn in the side of hospitals and is expected to only get worse in the coming years.
To avoid employee turnover, CEOs need to recognize the wants and needs of younger workers, who often place greater value on flexibility and work-life balance.
“Recruit, retain, and advance” is the focus for Crouse Health CEO and HealthLeaders Exchange member Seth Kronenberg, but bringing a worker through that journey looks different now than it did before.
“The linear path of ‘I stay as a bedside nurse for 40 years,’ that's really not where the younger generation is headed,” Kronenberg said. “People want to transfer into different disciplines and bounce around and work in person, work remote. So we want to be able to have those opportunities so that whatever somebody is looking for from a workforce lifestyle, we can provide.”
Meeting those demands can be complex and call for significant changes in how workers are managed, but by offering more options to employees, hospitals can cut down on burnout and seeing their staff walk out the door.
Utilizing the right technology
Another way to improve retention is by unburdening workers through the implementation of appropriate technology.
Choosing the right solution for the right purpose, however, can be a challenge with the number of choices that are currently available. AI is also still in its relative infancy, which means the limitations on its effectiveness, especially on the clinical side, is yet to be fully understood.
Where CEOs like Kronenberg see the immediate value of AI is in supplementing the workforce to relieve staff of administrative, time-consuming tasks.
“There's value in doing non-controversial, non-medical decision-making tasks that are just tasks that we're burdening our clinical teams with,” Kronenberg said. “That's where we're looking to invest while the rest of the stuff gets sorted out. But we we've seen the opportunity to leverage complementary services with AI that's not replacing the doc, but making the docs and the nurse function more efficiently.”
Examples of that include maximizing the electronic medical record, making documentation more efficient, and triaging patient messages.
Filling the gaps around your workforce with technology can result in organizations needing to hire less people to do many of these tasks.
Creating financial ROI
Ultimately, CEOs understand that they must make workforce decisions that will positively impact the bottom line.
One major way leaders are doing that is by pulling back their reliance on contract labor, which was crucial during the pandemic when turnover was high, but has since become too costly as the workforce has stabilized.
Cutting off labor from traveling nurse agencies or locum tenens is only possible though if organizations are keeping their recruitment and retention rates up by offering incentives that will be cheaper long term.
Instilling workforce governance to manage labor resources can also go a long way to ensuring financial health.
Identifying efficiencies starts at the top with leadership but should permeate throughout an organization because it’s the staff on the ground working closest with patients who can provide a much-needed perspective.
“It's a partnership with management and union. It's a partnership with senior leadership and the frontline managers,” Kronenberg said. “But we also believe very strongly in shared governance, so it's those at the bedside who have the best idea of how to create more efficiencies and partnering with them so they know that workforce initiatives are designed to help make their lives both easier and more efficient.”
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Connecticut officials have called on the parties to resolve their grievances and finalize the agreement.
Two years after agreeing to a sale of three Connecticut hospitals, Yale New Haven Health and Prospect Medical Holdings continue to be locked in a tug-of-war that is playing out in court and in the media.
Since agreeing to send Manchester Memorial, Rockville General, and Waterbury hospitals to Yale New Haven for $435 million in 2022, the two sides have lobbed lawsuits and criticisms at one another over the conditions of the deal.
Connecticut governor Ned Lamont and comptroller Sean Scanlon have reiterated the importance of the two organizations finding a middle ground to complete the transaction.
"We're in the red zone, getting into the end zone is pretty tough,” Lamont said in a press conference. “We've met with Prospect, Yale separately, met with them together twice, doing everything we could to get this deal done on behalf of the patients. Right now, this dispute lingers on.
“I’m not quite sure we’ll be able to keep them out of the courthouse. So in the meantime, I care deeply about patient safety there, making sure that we monitor that situation closely.”
Lamont also shared that he told Prospect that he wants an independent monitor to oversee the hospitals and ensure patient safety is not compromised.
Meanwhile, Scanlon believes that if Yale New Haven and Prospect can’t work out their differences, it could be time to move on from the deal.
“Litigating this in both the courts and the press is not in the best interest of the patients, and certainly not the members that are in the [health] plan that I run,” he said, according to CT Insider. “Either Yale needs to finish this purchase, or if it's not a workable deal for them anymore… I think we need to figure out another path forward."
The dispute started to take shape in May when Yale New Haven sued Prospect to get out of the acquisition, alleging that the seller engaged in “irresponsible financial practices,” including failing to pay physicians and vendors. Prospect filed a countersuit soon after.
Then, Yale New Haven said Prospect was underfunding its employee pension plans, which prompted the Pension Benefit Guaranty Corporation to get involved last month and claim that Prospect owed more than $4 million for the three hospitals it offloading.
In response, the California-based company accused Yale New Haven of waging “an aggressive campaign in both the courts and via the media to denigrate Prospect Medical’s Connecticut hospitals and employees.”
Yale New Haven has dug in its heels and remains steadfast in its desire to change the conditions of the deal for it to be completed.
"Without revised terms, we don’t see a path forward that would allow us to make the necessary investments in these facilities without jeopardizing our system’s financial sustainability and uphold our commitment to the communities that we currently serve," a Yale New Haven spokesperson said in a statement.
The disintegration between the two transacting parties is a reminder of the complications that can set in after a hospital deal has been agreed upon but before it is finalized.
Health systems not only have to deal with the uncertainty of the FTC potentially blocking transactions, but also with keeping partners satisfied with the agreed upon conditions.
This means that both the buyer and seller should do their due diligence when entering into an agreement, checking under the hood of the involved organizations to have the clearest picture possible of the assets in question.
Otherwise, a stalled-out or dragging deal can have major consequences in both directions, disrupting care for patients, harming reputations, and hampering finances.
Northeast Ohio will see new primary care clinics in the coming years, combining the strengths of the two organizations.
Amazon One Medical continues to partner with health systems on primary care when it enters a new market.
Cleveland Clinic is the latest organization to join forces with One Medical, with the two sides set to leverage each other’s capabilities to expand primary care in northeast Ohio. Through the partnership, Cleveland Clinic will be able to offer its patients access to One Medical’s care model at new facilities, while One Medical will get the academic health system’s network of specialists and hospitals.
The first joint primary care location will open in 2025, with Cleveland Clinic and One Medical determining where to open additional clinics over the next several years.
One Medical has partnered with numerous health systems to build out its primary care services. The deals allow the company to cut down on the expenses required to put up and maintain brick-and-mortar clinics, which have been difficult to scale for other retailers.
Walmart and Walgreens are examples of retreats in the primary care, with the former selling its MeMD virtual care business to telehealth startup Fabric and closing all 51 of its health centers, and the latter planning to cut its stake in primary care clinic chain VillageMD.
Amazon has dealt with its own set of challenges in the space, but has settled on One Medical as its consolidated primary care and telehealth platform after acquiring the company for $3.9 billion last year.
One Medical offers same and next-day appointments, along with around-the-clock virtual care through the Amazon one Medical mobile app. Amazon Prime members can add One Medical benefits to their membership at a discount, making the services widely accessible.
That integration is appealing to partnering health systems, who are aiming to provide more of a retail experience. Hospital operators will also increase their volume with One Medical sending patients to them to receive speciality care.
“This collaboration demonstrates a shared commitment from both organizations to meet the needs of our patients and to enhance the care we provide to our communities,” Tom Mihaljevic, Cleveland Clinic CEO and president, said in a statement. “Amazon One Medical will complement our current primary care offerings, enabling patient access to essential health services.”
Organizations are primarily seeking to improve the patient experience through future digital health solutions.
The digital health technology industry is booming as health systems continue to invest in the space.
Hospital operators raised their spending on digital health over the past two years and are planning to pour more resources into solutions in the next 12 months, according to a survey by the Peterson Health Technology Institute.
The survey fielded responses from 332 decision-makers at health plans, employers, and health systems to gauge purchasers’ current approach, contracting process, and future plans with digital health.
Among the 100 respondents from health systems, the top three motivations for spending on digital health solutions were increased consumer demand (87%), improved outcomes (65%), and cost savings (49%).
Over the next year, 56% of health systems expect to increase their spending on digital health, while 30% plan to maintain and 3% anticipate decreasing investments.
Through future solutions, health systems want to improve the patient experience (80%), reduce administrative cost (75%), improve patient access (73%), reduce administrative burden (61%), improve health equity (59%), reduce spending on targeted conditions and treatment areas (54%), and remain competitive with offerings (52%).
To measure value for digital health solutions, health systems look for increased patient satisfaction (89%), patient engagement (78%), improved performance against key clinical outcome metrics (78%), decreased spend on medical costs (66%), revenue (42%), and decreased spend on pharmacy costs (36%).
Where AI fits in
While being one of the most talked about digital health technologies, AI’s effectiveness in clinical settings remains murky.
Where health systems have shown more willingness to implement AI is with administrative tasks that can reduce the time staff spend on workflow, potentially leading to less burnout and employee turnover.
A recent report by Silicon Valley Bank revealed that this year has already featured more investments in health tech companies leveraging AI than in any other year, with AI valuations up 50% since 2019.
In terms of spending, 44% of all health tech investment dollars went to AI companies through the first months of 2024, compared to 36% for all of 2023.
The ambitious partnership is hoping to find success outside of the typical merger or acquisition.
Longitude Health is the latest iteration of health systems collaborating to address some of the industry’s foremost challenges.
Nonprofits Baylor Scott & White Health, Memorial Hermann Health System, Novant Health, and Providence are forming a for-profit entity that will attempt to find innovate solutions for areas of impact, potentially creating a sustainable model for partnership.
The venture isn’t an entirely new concept. Other initiatives like Civica Rx, a generic drug producer, and Truveta, an electronic health record data and analytics firm, have seen systems come together. Longitude, however, aims to be more collective, with the intention of adding more organizations down the road and sharing successful solutions with the rest of the field.
Josh Berlin, CEO of strategic healthcare advisors rule of three, wasn’t surprised to see Longitude form considering the appeal of partnering and building to tackle the domains the entity is targeting.
“Every once in a while, these organizations emerge: health systems collaborating to get things done that external vendors aren't able to do for them, that they haven’t individually been able to marshal the resources around to be able to accomplish, or just generally because they've got good collaborative relationships and perhaps it's a good way to think together and maybe it leads to something bigger long term, like the creation of the super system or super regional health system,” Berlin said.
Longitude plans to launch three operating companies initially, focusing on pharmaceutical development, care coordination, and billing.
More operating companies are expected in the future, but the three areas the founding partners are pursuing first represent a good mix of realms that are affecting all health systems across the board, which should give Longitude a clear runway to get started, according to Berlin.
“But they've also chosen three areas that although we haven't gotten right yet by any stretch of the imagination, there are already lots of players that are either saturating or near saturating the market,” he said.
Longitude’s governance model may challenge its ability to get off the ground quickly and seamlessly.
The CEOs of the founding systems—Pete McCanna of Baylor Scott & White, David Callender of Memorial Hermann, Carl Amato of Novant, and Rod Hochman of Providence—will make up the Longitude board, but it will be Paul Mango, former executive at HHS and CMS, serving as the entity’s CEO.
“These are four strong nonprofit health systems that are now angling together around an entity that is going to be run by an external leader to all four of their systems,” Berlin said. “With that comes the trappings of how quickly can you build? How fast can you accelerate to something that looks like a minimally viable product in market across the three different companies they said.”
There’s also potential financial implications and regulatory hurdles of nonprofit organizations operating a for-profit venture. That likely poses more of a complication than a roadblock, but it’s an added layer for the systems to contend with.
Another barrier to success could be the difficulty in building brand new solutions that will contend with companies already in the space.
“How do you get sort of the speed to value equation tackled? Not value equation relative to quality and cost, but literally the speed to creating a value proposition to where you're not just incubating it within these four health systems where it needs to work, but also the potential to contract with other health systems,” Berlin said.
The possibilities are evident and the road to them is one Longitude is willing to navigate. Time will tell if it’s a path other systems will want to follow.
The insurer giants are reportedly discussing combining once again after initial talks broke down last year.
Nearly one year removed from stalling out on a potential merger, Cigna and Humana have returned to the table, according to a report by Bloomberg.
The two sides have reportedly had informal discussions about combining that are in the early stages, people familiar with the matter told the outlet.
Though some of the same issues that likely kept a merger from taking placethe first time around are still present, other circumstances have changed, which could clear the way for an agreement to be reached finally.
The Bloomberg report highlighted that Cigna wants to complete the sale of its Medicare Advantage business in the coming weeks before agreeing to other deals. It was announced in January that Cigna is offloading its Medicare unit to Health Care Service Corporation for $3.3 billion. The divestment likely affords Cigna a cleaner path to acquire Humana’s share of the MA market in the eyes of both investors and regulators.
Where regulators may still attack the merger is on the pharmacy benefit management (PBM) side, where Cigna holds a strong presence with its ownership of Express Scripts. Adding in Humana’s business would potentially create a concentrated market and trip up antitrust regulators.
The Federal Trade Commission is also fresh off issuing its final rule on premerger filings, which only increases the burden on transacting parties, as well as the scrutiny on deals.
In the wake of merger talks reportedly picking back up, investors didn’t appear to be any more eager than the first go-around. Cigna stock fell around 5%, while Humana shares slightly ticked up to 0.3%, indicating tempered expectations of a deal taking place. Cigna stock also dropped last year when the discussions were reported before picking back up when talks ended.
However, the combination of Cigna and Humana’s areas of focus would be largely complementary and allow the resulting organization to compete against peers UnitedHealth Group and CVS Health. Since merger discussions were put on ice last year, CVS in particular has dealt with its own struggles and is in the midst of a CEO changeover, making its future murkier.
David Joyner will take over as the company heads in a new direction to stabilize its finances.
CVS Health’s reshuffling has reached the highest level of the organization, with the healthcare giant moving to replace its CEO as it searches for a new formula.
The national chain announced that Karen Lynch “stepped down from her position in agreement with the company’s Board of Directors,” giving way to David Joyner, who most recently served as president of CVS’ pharmacy benefit manager Caremark.
Lynch had held the role since 2021, joining the company when it acquired insurer Aetna. Joyner, who has been with CVS since 2023 and brings 37 years of healthcare and pharmacy benefit management experience, will also join the board of directors. Additionally, the current chair of the board, Roger Farah will now be executive chairman.
In a statement as part of the announcement, Farah expressed the board’s confidence in Joyner and that he “believes this is the right time to make a change.”
“CVS Health is responsible for improving health for millions of people across the U.S., and our integrated businesses work together to deliver on our purpose and mission every day,” Farah said in a statement. “To build on our position of strength, we believe David and his deep understanding of our integrated business can help us more directly address the challenges our industry faces, more rapidly advance the operational improvements our company requires, and fully realize the value we can uniquely create.”
Coming in the wake of several significant strategic moves by CVS to kick-start its struggling performance, the decision to oust Lynch isn’t entirely unexpected.
Earlier this month, there were multiple reports that CVS was conducting a strategic review and considering splitting up its retail and insurance businesses. The turbulent financial performance of Aetna, which suffered a 39% decrease in operating income in the second quarter, caused the company to let go of the insurer’s president, Brian Kane, and pursue a $2 billion cost-cutting plan.
In its retail business, CVS has doubled down on Oak Street Health, which it acquired for $10.6 billion last year. The company said it would open 25 more Oak Street clinics by the end of 2024 despite other retailers pulling back or exiting the primary care market due to its lack of profitability.
Alongside announcing the CEO change, CVS also cautioned against relying on its guidance that it provided in the previous quarter. The company is projecting its medical loss ratio to be approximately 95.2% in the third quarter, which will include a $1.1 billion charge for a premium deficiency reserve due to its Medicare and Individual Exchange businesses.
CVS will update investors on its earnings call, scheduled for November 6.
Terry Shaw shares with HealthLeaders his approach to navigating past the forces that resist transformation.
Innovating as a hospital or health system CEO can feel like a tall task thanks to all the mechanisms in place that maintain the status quo.
It’s easier to survive and keep moving forward than to innovate and walk a different path, but without the willingness to transform, organizations will find it harder to push the boundaries on operational and financial efficiencies while improving care for patients.
AdventHealth CEO Terry Shaw recognizes the reasons for pushing back against change, whether it’s a ‘if it ain’t broke, don’t fix it’ mentality or an ‘it’s too hard’ argument, and believes that every CEO will face them at some point during their career.
“Every organization has inertia and the inertia of the organization happens every day, day in and day out, and you as the CEO have to be willing to push through that inertia in order to get the organization to understand that we need to do something different,” Shaw told HealthLeaders. “Innovation is doing something different. And most big organizations, small organizations, whatever they are, are not wired to do things different. They're wired to do things the way they did them yesterday.
“As the CEO, you have to be willing to talk through your own message and push through the inertia of the organization to get to where you can do that. Then you have to provide a safe place for the innovation to take place.”
Pictured: Terry Shaw, AdventHealth CEO.
One of the ways AdventHealth aims for innovation is through its AdventHealth Design Center, which allows the hospital operator to find solutions for its most pressing problems. As Shaw put it, the facility’s team is made up of people that know how to break systems down and put them back together.
He compared the process at the Design Center to deconstructing a Ferrari Formula One race car and rebuilding it to optimize its performance.
“My question to my team is always, ‘Okay, you think you're running a Ferrari, but what can you take apart and put back together and make that car or to make our organization function better than it ever has in the past,’” Shaw said.
“You have to have a mindset. You have to have a methodology. You have to have a safe place and you have to have the expectation that not everything's going to work and it's okay. You have to allow your team to fail fast and then recover from that failure.”
When COVID hit, Shaw took several of his team members out of the day-to-day fight and sat down to figure out the system’s “no-lose propositions” once the pandemic ended. The result was an understanding that the way AdventHealth interfaces with its communities as it relates to primary care needed an overhaul, with reinvention needed in the outpatient arena.
The system then designed its Primary Health division, running primary care in four different models: traditional primary care, Primary Care+, urgent care, and senior care.
Shaw highlighted that traditional primary care has been retooled with the addition of facilities and doctors, while Primary Care+ is built to provide comprehensive care with additional and convenient hours. On the urgent care side, the system currently has 55 locations and hoping to grow to 100, whereas AdventHealth Well 65+ for seniors is expected to reach 30 to 40 clinics in the next three to five years, according to Shaw.
“That's one big way that we're innovating around how to meet consumer needs in a marketplace that is very complicated for most people to access care,” he said.
Those types of significant changes take time and effort, but as Shaw advises, the wheels of innovation can only be put in motion when CEOs first commit to breaking the wheel.
A new report analyzes where and how funding flowed in the sector through the first eight months of the year.
Investments in healthcare technology are stabilizing once again after hitting a lull during the pandemic.
While lofty company valuations from 2021 are being recalibrated and continue to dampen the market, investors are showing an eagerness to revamp their portfolios, according to a report by Silicon Valley Bank.
Health tech investment through August in 2024 is sitting between $4 billion and $4.5 billion per quarter, which has already exceeded the total for all of 2019. Deal volume hit a record high in the second quarter, contributing to 728 health tech deals for the first half of the year.
"We are witnessing a transition from the inflated valuations of 2021 and 1H-2022 to more sustainable investment practices," Julie Betts Ebert, managing director of Life Sciences and Healthcare Banking at Silicon Valley Bank, said in a statement. "AI is playing a crucial role in streamlining administrative workflows, and companies that can demonstrate a clear return on investment are driving the sector forward."
Here are four investment trends from the report:
AI on the rise
Transactions involving AI have significantly increased, signifying the technology’s growing presence in the industry.
This year has already seen more investments in health tech companies leveraging AI than in any other year, with AI valuations up 50% from the pre-pandemic levels of 2019.
A little less than half of all health tech investment dollars (44%) have been funneled to AI companies so far, compared to 36% for the entirety of 2023.
Mega-deals lagging
On the opposite end of the spectrum, mega-deals, or transactions of $100 million or more, are drying up.
Only 2% of deal volume in 2024 has involved mega-deals, with the 22 transactions trailing the 24 from 2023, 51 from 2022, and 98 from 2021.
Of the companies that produced mega-deals in 2021, more have gone out of business than have gone public, the report noted.
Seed rounds fueling activity
So far this year, 42% of health tech investment rounds were seed rounds, doubling the 21% from 2021.
Seed funding is contributing to the median deal size of $3.8 million.
Exits getting scarce
One of the ramifications of so many health tech companies underperforming after hitting the public market in 2021 is the difficulty companies are having exiting now.
After a whopping 186 venture capital-backed health tech exits occurred in 2021, that figure has dropped to 79 this year.
Of that total, 76 involved M&A exits, but the report warned that with M&A activity slowing down, investors need to be more willing to invest more long term, around 10 to 15 years.
The nonprofit health system experienced an encouraging turnaround in operating performance this past year.
Trinity Health, like several of its Catholic nonprofit peers, is trending positively with its finances.
In its earnings report for the fiscal year ending June 30, the Livonia, Michigan-based hospital operator posted an operating income of $66 million (0.3% operating margin before other times), a reversal from the $288 million loss it suffered in the previous period. Operating cash flow also went up considerably, jumping to $1.2 billion for a growth of 47.9% year over year.
Trinity attributed the increases to multiple factors, including the management of expenses.
“Improvements were attained in payment rates, same facility patient care volume growth and several revenue and cost management initiatives that improved operations,” the system wrote its in report. “These improvements were partially offset by unfavorable service and payer mix shifts.”
Operating revenue grew by 10.5% to $23.9 billion, with the acquisitions of MercyOne, North Ottawa Community Health System, and Genesis Health System accounting for $1.1 billion of the increase. Acquisitions and divestitures aside, Trinity’s operating revenue climbed $1.2 billion, or 6.2%, year over year.
The system was able to control costs to the tune of an 8.8% increase to $23.8 billion, with an emphasis placed on bringing down labor expenses. Through investments in the FirstChoice internal staffing agency and TogetherTeam Virtual Connected Care model, Trinity was able to bring down contract labor costs by 25.5% to $81.4 million.
On a same facility basis, salaries and wages grew by 6.2% to $558.2 million as the system “continues to implement initiatives to address industry wide staffing shortages and wage inflation.”
Though Trinity’s operations fared well, its bottom line reflected a decline from $959.7 million in 2023 to $475.5 million for the past year. However, the system stated the drop was driven by the $754 million BayCare disaffiliation loss and reductions in contributions.
Some relief for Catholic systems
Like Trinity, other Catholic operators like CommonSpirit Health and Ascension reported improved earnings for 2024.
While CommonSpirit remains in the red, the Chicago-based organization slashed its operating loss from $1.2 billion to $875 million and pointed to struggles with payers on delays and denials for holding back greater gains.
In Ascension’s case, the ransomware attack it suffered in May also kept the system from a healthier bottom line.
Through the first 10 months of the fiscal year, the St. Louis-based company reported a loss from recurring operations of $79 million, which was a major improvement from the $1.2 billion it lost the previous year. After the ransomware attack led to a $1.1 billion net loss, Ascension finished with an operating loss of $1.8 billion.
Despite the challenges faced over the past year, Catholic systems have shown that they have reason for optimism heading forward.
