For years now employers have incrementally imposed themselves into the private lives and behaviors of employees.
The motives are largely around money. Labor is the single largest expense for many industries. It costs a lot of money to recruit, hire, train, insure, and replace a worker. And increasingly, the beyond-the-walls personal conduct of workers, such as posting patient pictures and information on social media sites, is becoming more of an issue because employers can be held liable.
It's been a gray area. For example, a growing number of companies, including healthcare organizations, refuse to hire people who use tobacco, a legal product. This has been justified in the name of productivity, health insurance costs, and patient safety. Job candidates are tested for traces of nicotine in their urine to prove their innocence.
When do the legitimate concerns of employers verifying the claims of job applicants and employees crash against the privacy wall of those same people?
That question was answered recently when the Associated Press reported that job applicants at some companies were being asked by potential employers to provide passwords to their accounts on Twitter, Facebook, and other social media. For anyone looking for a bright line of demarcation in the privacy rights debate, this is it.
"It's a gross intrusion upon the privacy rights of job applicants and employees," says Paul Stephens, director of policy and advocacy with San Diego, CA-based Privacy Rights Clearinghouse.
"People using social networking sites have become accustomed to the concept of granularity, that is the idea that they can choose who will see the information they can post. That is why there are public and private portions of profiles and the ability to restrict which friends see which portions of various posting. Individuals have come to have that expectation that they can control what they post. What you are seeing here is a runaround that defeats the whole purpose of the granularity that social networks are providing to their users," he says.
So far, reports have been anecdotal. It's not clear how widespread a problem this has become. Chris Conley, a technology and civil liberties policy attorney with American Civil Liberties Union of Northern California, says action needs to be taken to ensure the practice does not become more prevalent.
"Let's hope this does not become a trend and we in the ACLU will be working with various alternatives to make sure that people don't have to reveal their private lives as a condition of being even considered for a job," he says. "We don't think information should be any more or less private simply because it is placed online. Letters you have in a shoe box at home or the emails on your laptop have an expectation of privacy and legal protection. No one would dream of having access to those. It should be the same for Facebook."
There is much that is wrong with demanding access to social media accounts.
For starters, what are employers looking for? What constitutes "objectionable behavior" on a Facebook page that would nix a job applicant's prospects? Would it be evidence of illegal drug use, criminal conduct or other egregious failings? Or would it be evidence of sexual orientation, age, or religious or political affiliations? Who defines what is objectionable?
And it is hard to imagine that such an invasion of personal rights would be universally applied to all job applicants or employees. Is the CEO candidate being asked to hand over the keys to her Facebook account, or is it just the folks applying for a job on the custodial staff?
"It's an unfortunate side effect of the fact that the job market is so tight right now, that individuals in many situations are willing to surrender their privacy and other rights in an attempt to secure employment," Stephens says.
Such violations might be tolerated in the short term when jobs are scarce, but those employees will justifiably bolt at the first opportunity. It would not be surprising to learn that companies that engage in this behavior also suffer high turnover and lack of employee engagement, and fail to see the linkage.
Finally, it's really not very effective. There is nothing to stop a job applicant from erasing from their social media accounts everything that might be deemed offensive or controversial. "That doesn't make the practice any less harmful," Stephens says. "Essentially, what is the employer gaining if the employee prior to providing the information can essentially sterilize or bleach their profile?"
So far there are no reports that healthcare organizations are engaging in this conduct. However, healthcare employs more than 14 million people and there are unquestionably huge consequences for providers who hire the wrong people. In this era of draconian HIPAA penalties, healthcare organizations are understandably sensitive to the implications of social media.
For anyone thinking about asking that job applicant across the desk for their Facebook password, don't do it.
The nominal information about that person you may glean from a social media site is of no value when it's compared with the damage inflicted on that essentially powerless person's sense of dignity. And even if they're "lucky" enough to get hired, it will be impossible to ask for their loyalty and trust after you've failed to extend it to them.
Even as the U.S. Supreme Court prepares to debate the constitutionality of the individual mandate, and Republican presidential hopefuls vow to scrap "ObamaCare" if they win in November, nearly every state is quietly implementing the provisions of the Affordable Care Act, a review shows.
The study by The Commonwealth Fund found that as the second anniversary of the Affordable Care Act nears, 49 states and the District of Columbia have already acted to support implementation.
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"I do see states moving assertively forward on implementing the provisions that went into effect in 2010," Sara Collins, vice president for Affordable Health Insurance at The Commonwealth Fund, tells HealthLeaders Media.
The report reviews state action on 10 early reforms, including the Patients' Bill of Rights that went into effect in September 2010. Between Jan. 1, 2010, and Jan. 1, 2012, 23 states and the District of Columbia had taken new legislative or regulatory action on at least one of these reforms, and an additional 26 states had taken other action to promote compliance with the reforms, such as issuing bulletins to insurers, The Conference Board said.
The reforms include:
expanding dependent coverage for young adults up to age 26,
prohibiting lifetime limits on health benefits,
phasing out annual dollar limits on health benefits,
prohibiting preexisting condition exclusions for children under age 19,
prohibiting rescissions (cancelling insurance, except in cases of fraud or intentional misrepresentation),
covering preventive services without cost-sharing,
expanding coverage of emergency services,
allowing choice of primary care provider,
allowing choice of pediatrician, and
allowing access to obstetricians and gynecologists without a referral
"Most states have either passed laws, issued regulations, or have taken other measures such as sub-regulatory guidance or exercising policy review to make sure the residents in their states are protected by these new provisions in the law," Collins says. "The fact that 49 states have moved forward to fulfill their role in the implementation of these reforms is pretty significant."
The lone exception is Arizona. "They officially told the researchers in the study that they are not moving forward to enforce the regulations," Collins says. "There is a nuance about some of the stuff the Arizona insurance department itself is taking care of, but the state itself is not moving forward."
"But let's be clear: People are protected by the provisions of the law whether or not their state moves forward with the provisions of the law. If Arizona says it can't pass legislation to implement the rule then obviously the federal government will need to enforce it."
Otherwise, Collins says, there does not appear to be much of a Red State/Blue State divide when it comes to implementing the ACA. "If you look at states that passed laws to give themselves the legislative authority to implement all 10 of these provisions, it's a mix: Connecticut, North Carolina, Maryland, Hawaii, Iowa, New York, Virginia, Vermont, Maine, Nebraska, North Dakota, and South Dakota," Collins says.
The Affordable Care Act was signed into law on March 23, 2010 by President Obama, with early market reforms taking effect six months later. The report found that the speed at which many states adopted the new provisions of the ACA probably was more dependent upon the schedules of state legislatures. The report also suggested that some states remain cautious about further ACA implementations until the U.S. Supreme Court rules on the constitutionality of the individual mandate. That ruling is expected in June.
The report warns that even though states have until 2014 to fully implement the ACA, some reforms could prove to be more difficult because they are new and don't exist in state law.
"When you look down the road to the 2014 reforms—the bans on underwriting, the guaranteed issue provisions, the new federal subsidies that will be flowing into states along with the Medicaid expansion—these are important changes that states are going to be experiencing in their markets, and also just in terms of their overall fiscal health," Collins says. "These are long-term chronic issues that we have experienced for many years and these provisions really do address some of the serious issue that states have faced."
The federal government's decision to withhold about $600 million in funding for primary care community health centers will have a disproportionately hard effect on rural Americans.
More than 90% of the 20 million people who are served by health centers have incomes that are below twice the federal poverty level. And about 48% the of the nation's 8,100 federally funded community health centers serve rural communities. People in rural areas tend to be older, poorer, and sicker than their urban counterparts. They also tend to have fewer healthcare options and more difficulty accessing healthcare than people in urban areas.
About one-in-seven rural Americans gets their care from a community health center.
With that in mind, it's troubling to see the ambitious plan to double services and access from 20 million people to 40 million through community health centers waylaid by the budget battle, even though the need is growing.
Last year, for example, communities across the nation submitted 1,900 health center grant applications for new sites or services to the Health Resources and Services Administration, which oversees the program, but only 67 applications were approved because of funding shortages.
This seems remarkably short-sighted when almost everyone, regardless of their political leanings, understands that access to primary care, preventive medicine, and disease management are cost-effective alternatives to acute episodes that require hospitalization.
A report from the National Association of Community Health Centers notes that a lack of access to primary care services and other barriers to healthcare lead invariably to poor health outcomes. That, of course, creates higher healthcare costs as uninsured or underinsured patients—or insured patients with few primary care options—go to the emergency room for non-emergency care.
Dan Hawkins, senior vice president for policy and research at NACHC, says the grant money, which can be as much as $650,000 per site, typically accounts for about 20% of the operating budget for most community health centers.
"It is the foundational support. It is what allows them to go out and hire staff and secure a facility to begin providing services," Hawkins tells HealthLeaders Media.
"Every payer reimburses after the fact. The rest of it comes from Medicare/Medicaid, private insurance. About one in six health center patients has private insurance, some state and local support, philanthropic support, and even money from the patients themselves. But the health centers can't get any of that until they're able to get the ball rolling. That is what the grant does. It gives them the ability to get off the ground and get going," he says.
Hawkins says that community and rural hospital leaders "should be working overtime to help make these health centers operational."
He says rural hospitals and other providers should view community health centers not as competitors, but as partners in delivering care. Frequently, hospitals can provide transportation to care, or make home healthcare visits to better monitor patients, or translator services.
"Health centers don't exist to compete with hospitals. They exist to cooperate and partner with hospitals," he says.
For example, health center clinicians are required to follow their patients into the hospital as part of the continuum of care. "That means for a rural hospital [that] additional clinical staff will be adjunct, but with admitting privileges," he says.
While 40% of health center patients are uninsured, the remaining 60% of patients do have some form of coverage, "so for the bulk of patients who rural health centers serve there is a payer source for those patients if they need to be admitted or they need an MRI," he says.
"Secondly, because the health centers are there and generate business for hospitals, they have literally helped to keep hospitals open and they've done the same for nursing homes," he says. "They are often adjunct staff for rural nursing homes who will visit patients in the hospital to provide care and they help to keep things functioning."
"Thirdly, health centers have formed partnerships to secure other kinds of funding for home health agencies and visiting nurses and other kinds of partnerships with hospitals," he says. "So whether it's from a business perspective, from a let's-keep-the-doors-open perspective, or a partnership perspective there are many reasons why rural hospitals should support the opening or rural health centers."
The NACHC report notes that rural counties with community health centers had 25% fewer uninsured in the emergency room for ambulatory care sensitive conditions, compared with counties without a health center.
"Most importantly even if that rural hospital has an emergency room, who wants to see it crowded with people who don't need to be there but they don't have anywhere else to go?" Hawkins says.
The study also found that community health centers generate about $5 billion annually to rural communities through employment and supplier purchases.
It is hard to say if Congress or the White House would respond to a concerted effort by rural healthcare providers to call for the reinstatement of funding levels for community health centers.
But it's not a hard argument to make or to grasp. Rural healthcare providers should make the case for community health centers even if our elected representatives seem immunized against calls for logic and common sense.
It appears that reforms under the Patient Protection and Affordable Care Act are doing little to appease employers' longstanding concerns about the rising cost of providing health insurance to workers.
That might not necessarily be a bad thing, however, if that anxiety creates cost-effective new benefit options that target what employees say they value.
For the fourth year in a row, the cost of employer-sponsored healthcare topped the list of concerns in the 18th annual Top Five Total Rewards Priorities Survey, published by the International Society of Certified Benefits Specialists and Deloitte Consulting LLP.
David Lusk, a principal at Deloitte and author of the report, says there is too much uncertainty around the PPACA to offer much comfort for employers right now.
"The first [uncertainty] being the Supreme Court reviewing the individual mandate," Lusk says. The court has set aside three days next week for the review, with a decision expected in June. "There are studies that have been done that say without the individual mandate, the concept doesn't hold together. We are going to spend more time hearing and arguing about this topic than any topic in decades. That gives you a sense of the importance of it."
Lusk says that 48% of the 330 respondents to the online survey said they were taking a "wait and see" approach, and apparently had no plans make changes in their coverage.
Of the companies planning changes, 17% said they might drop employer-sponsored coverage for full-time employees and pay the penalties, 37% plan to maintain their grandfathered health plans as long as possible, and 23% are considering reducing the hours for part-time employees below the threshold to avoid mandatory health coverage.
The survey also found that:
85% of respondents believe their benefits costs per employee will increase over the next five years because of the PPACA.
68% of employers plan to reevaluate their benefits strategy because of the PPACA.
70% are considering expanding wellness programs to help manage healthcare costs.
With so much uncertainty and potential cost at play, Lusk says companies might reexamine their traditional role in providing healthcare coverage. However, dropping healthcare benefits and sending employees out to find their own care on government-sponsored health exchanges presents its own sets of risks and reward, and depends heavily on the type of business. "Companies would make decisions around how transferable the skills are and how easily somebody is replaced," Lusk says.
Some employers would feel that dropping healthcare coverage would put them at a significant disadvantage with competitors for recruiting talent. However, Lusk says money saved from cutting healthcare coverage could be used to provide other incentives that employees might actually prefer.
"Let's say a company pays $8,000 a head today, and the penalty to drop insurance is $2,000 or $3,000 or a substantial difference. They take the number of employees times that difference, and they generate a pool of money. With that money they say, 'We want to bolster our 401(k) match, or a profit-sharing plan, or start a variable pay plan where everyone benefits from the company's success,'" he explains.
"This could create some tremendous flexibility for creative organizations to relook at all their rewards, understand there may be a new alternative for healthcare, and decide if for them they have to sponsor healthcare," Lusk says. "If there is money saved from that, they need to show how it can be redistributed in a new way."
The problem for many companies, Lusk says, is an inability to think "holistically" when it comes to redesigning benefits structures. Employer-based programs like workers compensation, health insurance, and retirement plans tend to be looked at in isolation.
"Companies could benefit from looking at [these programs] holistically and looking at them concurrently and saying, 'Do our employees value these programs?' If there is an area that isn't that important but there is a lot of money, maybe that is the place to cut back and redistribute. It doesn't have to be about cutting costs. They can think about redistribution."
Many companies would be loath to stray from the norm and offer pay and benefits that aren't comparable with competitors. But Lusk points out that "the reasons why individuals are attracted to or stay with companies are not those transactional benefits around comp and benefits, but those relational rewards around environment, understanding the organizational strategy, communication from leadership, and learning and development." Benefits are not the main drivers in employment decisions—at least, not yet.
Expect the wave of hospital mergers and acquisitions to grow, says the author of a new report from Moody's Investor Service.
The only thing that might slow the accelerating pace of M&As of not-for-profit hospitals and health systems would be if the U.S. Supreme Court overturns the individual mandate in the Affordable Care Act.
And even if the mandate is scuttled, Lisa Goldstein, associate managing director at Moody's, says that will create only a temporary "stumbling block" in the consolidations, because other financial pressures will remain in play regardless of the high court's ruling.
"If the Supreme Court rules that the individual mandate is indeed unconstitutional, then some hospitals or health systems may take a pause and ask, 'Do we need to grow? Do we need to join a system?'" Goldstein tells HealthLeaders Media. "But we believe that would be a brief pause because the main driver of the consolidation wave is overall payment reform, revenue reductions, and reimbursement pressures. Whether or not the mandate stands, the reimbursement pressure is going to continue."
Goldstein, the author of a new Moody's report—New Forces Driving Rise in Not-for-Profit Hospital Consolidation—says many of the market forces that were in play in the not-for-profit consolidation boom of 12 years ago are still in play now. Those forces include improving market share to better leverage payers, risk sharing, economy of scale, access to capital and technology, expansion of service lines, and improved recruiting.
However, Goldstein says, unlike 12 years ago the current push is fueled by new variables that include the stagnant economy, spiraling healthcare costs, and unfunded pensions. What's more, this latest wave of consolidations is being initiated by a new group of investors that mostly weren't in the picture a dozen years ago, including insurance companies, for-profit hospital companies, and private equity firms.
"This country was founded on not-for-profit healthcare. Historically hospitals have been roughly 85% not-for-profit or government owned, and 15% for-profit," Goldstein says. "It is not balanced at all, but we may see some movement in those numbers. The for-profits are aggressive. Their strategies are all about growth and returning shareholder value, and you do that through growth."
After bunkering for years in a stagnant economy, Goldstein says for-profit entities are looking for investments. "They have resources," she says. "Many of the for-profits held their cash on the sidelines during the recession and the credit crisis, and now they are ready to put it to work. We could see some increased for-profit activity."
Goldstein says private equity firms such as Cerberus Capital Management have acquired hospitals because they see the successes of for-profit systems such as HCA, Vanguard Health Systems, and Tenet Healthcare Corp. "They see the margins the for-profits produce, which are very strong, and they say, 'We need to put our money to work. If these guys are getting a good return, we're going to do it too,'" she says. "Typically, the for-profits run very lean operations."
Goldstein says these for-profit players do not appear to be overly concerned with expected thinning reimbursements from government and private payers, in part because the for-profits can better control their patient mix.
"As a for-profit, they don't necessarily need to treat all comers unless it's through the emergency room," she says. "So they may be more selective about taking the private-pay commercially insured folks, and maybe less the Medicaid and Medicare folks. So their payer mixes differ widely from the not-for-profits. Whether or not a hospital is better managed by a for-profit or a not-for-profit, we cannot say. It's a different mission and different strategies."
Another factor fueling the consolidations is the expected diminishing reimbursement from private payers. A dozen years ago, providers could cost-shift low Medicare and Medicaid reimbursements to the private plans. Not anymore.
Rather than relying on pure market share, she says, providers will increasingly have to demonstrate to private payers and government programs that they can provide high-quality care at a lower cost. The move toward outcomes and evidence-based medicine has also been a key driver in physician alignment and employment models for many health systems.
"Size and scale remain important drivers to today's consolidation strategies, but the opportunities to gain leverage and higher rates from commercial payers are quickly dissipating," she says. "Size and scale are now an important means to gaining greater efficiencies and driving waste and costs out of the delivery system."
With the continued consolidation, hospitals that are left behind to stand alone will face significant challenges, Goldstein says. "Hospitals close every year, and we would expect closures to continue," she says. "Our thinking is that there will still be independent hospitals, but the smaller of those hospitals may evaluate their service offerings, may downsize their footprints. So instead of operating a 100-bed hospital, maybe they go to, say, 60 beds and more toward ambulatory services. So the service line and the modality, more on the outpatient, may change."
With apologies to John Donne, no hospital is an island.
It doesn't matter if your hospital is in midtown Manhattan or Manhattan, KS. It doesn't matter how many licensed beds you have or how high you scored with HealthGrades. If you've got problems at your hospital—from labor disputes, to HIPAA violations, to dirty sheets—you'd better be prepared to have answers for the government, public advocacy groups, plaintiffs' attorneys, and the news media.
In the era of the Internet, specialized trade journalism, and the 24-hour news cycle, every misstep is a headline waiting to happen.
That was apparent this week when Washington, DC-based Public Citizen issued an alarming press release detailing potentially dangerous infection risks at one Wyoming hospital located 1,849 miles due west of the nation's capitol.
According to Public Citizen, 88-bed Sheridan Memorial Hospital made a decision to stray from the manufacturer's guidelines and failed to adequately sterilize reusable laryngeal mask airways. As a result, "several hundred patients" were potentially exposed to assorted infectious viral and bacterial agents between May and November of 2011.
"The hospital's decision to abandon steam sterilization was reckless and potentially dangerous for patients undergoing surgery at the hospital," Michael Carome, MD, deputy director of Public Citizen's Health Research Group, said in a statement which was sent to media outlets across the country.
After being contacted by HealthLeaders Media on Tuesday and shown Public Citizen's accusations, SMH issued a statement saying that the problem had been identified in November, reported to the state, and resolved.
"The (WY) Department of Health directed the hospital to change procedures to include steam autoclaving," the statement read. "SMH immediately implemented the new procedure, developed a procedure spreadsheet, and posted directions for the staff. The plan of correction was implemented that day and no further corrective actions were recommended by the state."
Hospital officials said they had received no reports of infections or complications related to the problem, which they suggested had been resolved.
"The medical staff executive committee based on surgery department reports and consultation with the state Department of Health believe that compliance with the state recommendations have been achieved and that any risk of infection to surgery patients prior to the change is very low," said SMH Chief of Staff John Addlesperger, DO.
The Wyoming Department of Health also issued a statement indicating that the issue had been resolved:
"Following receipt of the anonymous complaint in November, our department did investigate the issues surrounding the airway devices at the hospital in Sheridan. They addressed concerns about the tracking of the use of the devices as well as the sterilization procedures. Our department ordered those issues to be fixed and they were fixed that same day at the hospital. Since then, there have been no related reports of illness made to the hospital or to our department," the statement read.
After HealthLeaders Media showed SMH's statement to Public Citizen, the advocacy group issued a counter-counter-statement ridiculing the hospital's assurances that former patients were not in danger.
"The claim by the hospital that ‘there have been no infections or complications that have been reported in relation to this situation' is ludicrous for two reasons," Carome told HealthLeaders Media.
"First, because the hospital did not proactively notify affected surgical patients of their exposure to inadequately sterilized devices, patients experiencing any infections or complications would not have attributed such events to the exposure since they were unaware that inadequately sterilized LMAs had been used. Second, certain infections may be asymptomatic, and without appropriate screening, may have gone undetected so far."
It was not clear at deadline if SMH was planning a counter-counter-counter statement. It almost doesn't matter. Did SMH correct the problem, as it claims? Or did the hospital sweep it under a gurney, as Public Citizen suggests?
Who knows?! The rest of us don't have to pick a side. For us, the back-and-forth between the hospital and the advocacy group is better seen as a cautionary tale about questionable decisions that can come back to haunt you.
The moral of the story: No matter its size or prominence, if your hospital deviates from SOP, no matter how seemingly innocuous at the time, you'd better have a good reason and you better be prepared to explain it to the world.
The nation's hospitals are seeing continued relatively high leadership turnover, but most providers are doing little if anything to plan for it.
Thomas C. Dolan, president/CEO of the American College of Healthcare Executives, says a new survey from his organization tracked hospital CEO turnover at 16% nationwide in 2011, the same as in 2010. Between 2001 and 2009, he says, CEO turnover has run between 14% and 18% nationally.
By comparison, average annual CEO turnover is about 13% for Fortune 100 companies, he says.
Dolan has a ready explanation for the high turnover. "First of all, in general they are very difficult jobs and they have never been harder with healthcare reform and demands from the various stakeholders often conflicting in nature," he says.
"Secondly, if you are good at one of these jobs you get recruited constantly."
"Third, unfortunately if you are not good, there is little tolerance for poor performance. As best we can figure out about 20% of those 16% who turn over every year are being terminated," he says.
"The last one is the Baby Boom retirement. The average hospital CEO is approximately 55 years old. That is the median and clearly a number are older than that and they are heading into retirement," Dolan says. "I expect that 16% to stay constant and maybe creep up in the next few years."
Dolan says it's hard to put a price tag on the cost of this leadership flux. "But I can tell you that when there is a vacancy at the top things don't happen," he says. "Partnerships are not made. New people are not hired. Sometimes senior people might start looking for other positions. Medical staff may defect. Whenever there is a vacuum in that top leadership position, there is a tendency in that organization for push back until a new leader is appointed."
Hawaii, Puerto Rico, and Wyoming led the nation with hospital CEO turnover rates of 35%, 30%, and 29%, respectively, in 2011. However, Dolan warns against reading too much into one year of data. "Hawaii and Puerto Rico, for example, have relatively small numbers of hospitals. So, one or two random changes could affect them disproportionately," he says. "What are more likely to affect turnover are highly competitive areas, low reimbursement states, things of that nature."
Along with the high turnover, Dolan notes, 58% of hospital CEOs have been on the job less than five years, and that also has the potential to create problems in continuity of leadership.
"We pretty much know from the management literature that if you go in and make positive changes in an organization, if you aren't there for at least five years to make sure those changes aren't woven into the fiber of the organization, oftentimes organizations will go back to what they were doing in the past," he says. "You might have a great CEO who makes a lot of changes, but if she or he leaves in a few years oftentimes the organization will revert to its old ways."
Even with more than a decade of relatively high CEO turnover, Dolan says a large majority of hospitals still have no succession plans in place.
"We did a survey on this a few years ago and only about 20% of hospitals have a CEO succession plan," Dolan says. "When we prod them and ask 'why don't you?' the most common response is 'we just hired a new CEO.' We come back and say 'the median hospital CEO tenure is only four years.'"
While succession planning is the primary responsibility of the hospital board, Dolan says that CEOs should be active partners. "As soon as a new CEO is hired the board and the CEO should agree to develop a succession plan and start working on it immediately," he says.
"First of all they have to determine whether they can groom people from within," he says. "In a very small hospital you may not be able to. Then you have to make sure that you have somebody who can fill in on the interim as you recruit somebody from the outside."
Larger healthcare organizations may have the luxury of grooming several internal candidates for the top spot. "If the CEO leaves, then hopefully you are promoting from within, supporting that individual with on-boarding and coaching their first year because it's always a big change moving to No. 1 even if you've been No. 2 in the organization," he says.
Whenever possible, Dolan says, the new CEO should be promoted from within. "The evidence from the industry is very clear that the most successful companies promote from within," he says. "Their returns are better. Their stability is better."
Job growth in the healthcare sector has been strong in the first two months of 2012, accounting for one in five new jobs in the overall economy, and even surpassing the robust pace of job growth throughout most of 2011, new federal data shows.
The Bureau of Labor Statistics reports that the healthcare sector created 49,000 jobs in February, including 28,200 jobs in ambulatory services, and 15,400 jobs in hospitals.
J.D. Kleinke, a fellow at the American Enterprise Institute, said the explosion in healthcare job growth "is just more of the same."
"Healthcare is recession-proof. Healthcare costs always go up. There is always going to be growth," Kleinke says. "For all its capital and technology, it is still a labor intensive industry. People want to see their doctors. Nursing is very labor-intensive. You can't automate healthcare like you can manufacturing."
Revised BLS figures show that healthcare created 43,300 jobs in January, continuing a strong trend in job growth that saw 296,900 payroll additions in 2011. Healthcare accounted for more than 18% of new jobs in the overall economy last year, Bureau of Labor Statistics data shows.
In 2011, ambulatory services, which include physicians' offices, accounted for 64% of the job growth in healthcare. The subsector created 18,500 jobs in January and 191,400 jobs in 2011, after creating 166,100 jobs in 2010.
Michael T. Rowan, COO at Englewood, CO-based Catholic Health Initiatives, says he expects healthcare job growth to continue well into the future as Baby Boomers age, and healthcare reforms expand health insurance coverage to an additional 30 million people and place more demands on healthcare providers.
"Certainly healthcare is one of the few bright spots in the economy," he says. "It is the nature of healthcare that we are always going to be around. Health is one of those universal issues that affect everyone. We are an industry that is everywhere. Even the smallest community has healthcare in one form or another."
Rowan says the top driver for job growth at CHI is information technology.
"There is a mandate to get to meaningful use under healthcare reform and people are putting in clinical information technology systems and that is fueling significant hiring," he says. "In our organization we are looking at about $1.5 billion we are going to spend over five years to upgrade our clinical IT and we are hiring nearly 400 additional people just to be able to install and then manage those systems. That doesn't even count toward the hiring that has taken place in our local markets."
The physician-employee model is also driving hospital employment.
"More and more physicians are looking to be employed versus out there in private practice," Rowan says. "Using CHI as an example, we have hired more than 1,000 additional physicians over the last 24 months."
Another driver is the demand for administrators who can help hospitals and health systems navigate through new federally mandated payment models. "With the move from volume-based fee-for-service reimbursement to going at risk for episodes of care and the like and population health management, all of that is calling for some new competencies related to risk and insurance," Rowan says.
"Those are not skill sets that most hospitals and health systems have. So, we are hiring people with that background and expertise. It's not at the level that you see for IT and physicians, but it is still significant."
Kleinke says the high demand for technicians to install and operate complex electronic medical records systems are creating new opportunities for American workers who've been left behind in the recession and changing economy.
"It's a perfect job in the new economy for somebody who used to work in an assembly plant or a service job or used to do something that's been off-shored," he says. "It is something you can learn to do in a couple of years at a technical school. There are federal grants available for that and the jobs are there and the jobs are good."
More than 14.2 million people worked in the healthcare sector in February, with nearly 4.8 million of those jobs at hospitals, and more than 6.2 million jobs in ambulatory services, which includes more than 2.3 million jobs in physicians' offices.
The 49,000 jobs created in healthcare in February represent 21.5% of the 227,000 jobs created in the overall economy for the month. In 2011, the 296,900 jobs created by healthcare represented more than 18% of the 1.6 million jobs created in the overall economy that year.
BLS data from January and February are preliminary and may be revised considerably in the coming months.
In the larger economy, the nation's unemployment rate stayed unchanged in February at 8.3%—maintaining a level last seen in early 2009. BLS said the 227,000 new jobs created in February came from healthcare and social assistance, professional and business services, leisure and hospitality, manufacturing, and mining.
Even with the modest gains, BLS said 12.8 million people were unemployed in February, matching January's measure. The number of long-term unemployed, defined as those who have been jobless for 27 weeks or longer, was little changed at 5.4 million in February, and represented 42.6% of the unemployed.
This article appears in the February 2012 issue of HealthLeaders magazine.
The weak economy has limited the ability of many healthcare organizations to pursue capital projects; indeed, in our March 2011 Intelligence Report, only 29% of respondents said their capital projects were unaffected by delays or elimination, and fully 42% anticipated difficulty accessing capital. While capital spending is expected to increase in the coming year, what short-term and long-term effects does this sluggish economy have on fulfilling strategic goals, and what factors are influencing where you will focus your capital spending?
Gregory Pagliuzza CFO, Trinity Regional Health System, Rock Island, IL
Our local balance sheet and income statements are not the prime performers within Iowa Health System [with which Trinity is affiliated]. We get an allocation based on our financial performance and operational needs, requiring us on the capital side to step it up as far as operations go. I know we are not unique in this, but for us it is a little bit more highlighted because we have some older facilities and we need an upgrade. We also have some other functional issues capitalwise that are causing lots of challenges.
Our oldest facility needs significant upgrades. I think it was opened in 1971, so it is 40 years old and there has not been a significant outlay to modernize it. We know what we would like to do, which is to expand and redo our emergency room and set up a cardiovascular center. We also have a significant investment in behavioral health.
The reality is we are going to have to scale it back. We are in the middle of the process to try to justify it, to at least get the cardiovascular and emergency room overhaul done. That has a $70 million-plus price tag. We can borrow. We are AA rated so we are in an excellent position to go out to the capital market. Access to capital is dependent upon our financial performance. If we don't perform, we may not be able to go out and expand as we would like.
Mark Bogen Vice President of Finance, South Nassau Communities Hospital, Oceanside, NY
Between the equipment technology and bricks and mortar, we've invested close to $300 million in the past dozen years. A master facility plan was launched in the 1990s, culminating with the 170,000-square-foot bed tower in 2006. That success led us to continue an enhanced plan to take us into the next 20, 25 years. In 2008 we got the board to sign off on the plan right as the stock market tanked. We put it on the shelf. We resurrected it again about a year ago, and we are continuing to look at it.
We have been chasing the mythical 435-bed operating capacity as part of the overall master facility plan. But given the length-of-stay decline that we have continued to enjoy over the past four or five years and the softening of the economy and some of the elective surgeries that people are postponing, we are really now looking again at the master facility plan. We don't want to build something that is not going to be supported in the years to come under healthcare reform. With that said, the expectation is we plan to do this master facility plan, which will probably have a price tag of $200 million.
It's not so much currently the access to capital, because we have a strong balance sheet and we have had good performance these past three or four years. But even though interest rates are low, that doesn't always translate into the real cost of capital and whether you can create and demonstrate financial feasibility to ultimately borrow the money.
Gary Boyd CEO, Mammoth Hospital, Mammoth Lakes, CA
We are a 17-bed critical-access hospital, and the 10-year facility plan is a $50 million expansion of the inpatient area and creating some new clinic space. We are rated BBB-plus, and we would like to be rated AA-minus. We need a couple more years of financial performance behind us before Standard & Poor's will raise our ratings. The healthcare climate, healthcare reform, all those things are going to make that challenging.
We put about 10% on the bottom line and our goal every year is between 7%–10% of margin. If we do that, we will have access to capital. We have done a real financial turnaround here in the past three years. At one point we were down to about 35 days of cash on hand. We couldn't even get a line of credit from the local banks. Today we have about 140 days cash on hand and the banks are coming to us.
Our goal is to have 180 days cash on hand, and everything over that will go toward the building project. As long as we maintain that strong financial position, we will have access to capital—not like the big guys, but we will have what we need.
Jim Shannon Executive Vice President of Development, LHP Hospital Group, Plano, TX
The impact of reform: Two things drive the discussions that I am having around capital. The first is healthcare reform. Hospitals that were fiercely independent for decades are no longer feeling comfortable being independent. Everybody is sensing that scale is going to be necessary to compete successfully going forward.
The impact of markets: The second issue is there has been a lot of deferred capital over the past few years, and it is starting to be unsustainable in some markets. Given the weakness in the tax-exempt bond financing arena, folks are finding it more and more difficult to access reasonably priced capital. So they are looking for alternatives.
The calls I get are generally from hospitals that have some big capital need that they can't meet on their own. I don't think there is any doubt that the sluggish economy has impacted the credit markets, which in turn have impacted the amount of capital that hospitals have available to them to spend.
The widening gap: What you see in the healthcare industry is similar to what you see in the economy as a whole. There are haves and have-nots, and the gap is widening. The volume of tax-exempt financing has picked up pretty substantially over the past year and a half or so. But the systems that are getting those bonds tend to be the top-tier organizations. If you are not one of those top-tier organizations with investment-grade credit ratings, it is really difficult to access tax-exempt financing
right now.
This article appears in the February 2012 issue of HealthLeaders magazine.
Michigan's remote Upper Peninsula may soon have a new blue chip player competing in the healthcare arena with the likes of the prestigious Mayo Clinic and Henry Ford Health System.
Duke LifePoint Healthcare this week announced that it has signed a memorandum of understanding to explore a partnership with Marquette General Health System, a regional referral center that serves about 300,000 people in a 15-county area in the U.P.
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If the deal is finalized in the coming months and approved by the Michigan Attorney General, Duke LifePoint would take ownership sometime this summer and MGHS would become a for-profit entity.
MGHS President/CEO Gary Muller says it is too early to put a price tag on the value of the deal, but he told HealthLeaders Media that an outright ownership arrangement by Duke LifePoint, with oversight from locally controlled board of trustees, makes the most sense.
"Our board looked at different joint ventures, 80-20, and 50-50 partnerships," Muller explained. "They felt like the best thing for the community is to have an outright acquisition by Duke LifePoint because otherwise you don't gain as much capital or involvement. You do give up autonomy to an extent, but why go halfway?"
Muller says MGHS is negotiating from a strong financial position, but also with an understanding of the new challenges for recruiting, service lines, and capital that non-urban, not-for-profits face in a shifting and highly competitive healthcare delivery landscape.
For example, the health system had planned on Medicare reductions of about $55 million over the next decade. A few weeks back, however, they were notified that the reductions would total about $90 million.
"A lot of the companies come in and buy hospitals that are in trouble. We are definitely not in trouble, but I will give our board credit for looking ahead," Muller says. "It's like when you are selling a house. You want a nice house with a good roof. It is, in a way, giving an asset to another company. But what we and our board see is a larger gain for the community in terms of quality and the tax base. Local control is still going to be here because we will keep the board."
While the notion of surrendering community ownership to an out-of-state for-profit company required some adjustment, Muller says the MGHS board "took a leap of faith and changed their whole perception."
"We see many boards that don't take our board's position. A few of them are neighbors. They see the hospital as their asset, but it is really the asset of the patients and the communities," he says. "Not-for-profits lack the capital and the scale that we will have and their communities will suffer."
Muller says that the MGHS board also recognizes that Duke LifePoint would bring assets, efficiencies and a national reputation for quality.
"We are a fairly large $310 million business and with our scale of purchasing we will immediately save on that," he says. "We can recruit physicians better through Duke. We are also looking for quality oversight, which our doctors are very much looking forward to, even though we are doing well. They know that to compete with Mayo Clinic up here or Henry Ford downstate we need to be a little bit better."
William F. Carpenter III, chairman/CEO of Brentwood, TN-based LifePoint Hospitals, told HealthLeaders Media he doesn't believe that MGHS' remote location will pose significant logistical or cultural challenges.
"Our focus was on North Carolina and the surrounding region but clearly the Duke LifePoint partnership has a range beyond that," he says. "When you look at the map you see a region in the Upper Peninsula that is very well suited to what we are trying to accomplish in that original vision; to build a strong network there around a regional medical center in Marquette."
If the deal is finalized, MGHS will be the first hospital in Michigan for LifePoint, which now operates 56 hospitals in 19 states.
"The focus of Marquette General will continue to be on patients in the Upper Peninsula so they are able to receive quality care close to home. The Duke LifePoint partnership will enhance that. I don't think of it as being in competition with anybody. I see it strengthening community-based care in the Upper Peninsula."
Carpenter believes that hospitals across the nation are in the same situation as MGHS and could be ready for a new business model.
"They are considering how they will respond to the significant financial pressures that they feel based on the lingering effects of the recession, based on the reductions in reimbursements that are facing us, [and] based on the very challenging regulatory environment that faces all of us, the cost of technology and capital improvements," Carpenter said.
"LifePoint and Duke LifePoint are perfectly aligned with the interests of local community hospitals in dealing with that because we bring resources designed to improve quality of care and designed to provide state-of-the-art technology and make capital investments in community hospitals," he says. "It is a great match."
