When former President Jimmy Carter's sudden illness struck on his way to Cleveland in late September, he was taken directly to the hospital, of course. It's the hospital to which he was taken to that seemed to raise questions: Carter went not to the Cleveland Clinic or to University Hospitals, two world-renowned medical centers within roughly equal distance from the airport. Instead, the Secret Service escorted him straight to MetroHealth, the Cleveland area's public hospital.
Some were surprised, but MetroHealth is a quality institution. It's among the top 1% of hospitals in the country for quality and safety, according to the Premier healthcare alliance, and all its physicians are faculty at Case Western Reserve University School of Medicine. However, outside its home base, and even within, the fact that MetroHealth serves the majority of the uninsured and indigent population had some asking questions about why such an important person would go there in an emergency.
MetroHealth is far from a decayed urban shell of its former self. Led by a former economics professor and high-powered consultant for Booz Allen Hamilton who has worked in a variety of industries outside healthcare, MetroHealth is in the midst of transforming itself into a provider of choice—rather than last resort—for Clevelanders and those in its suburbs. It's doing so by remaking its image as a comprehensive healthcare provider, not just a hospital for the indigent, says President and CEO Mark J. Moran. "We're serving the toughest cases—people who can't get access to the other systems in town, and we're also in the most competitive markets in the country," he says, discussing the biggest roadblocks for MetroHealth.
"We've been working recently to tackle a challenging business problem, which is how to compete and be attractive and relevant in this town," he says. "But that problem has morphed, because now it's about how to compete and be relevant in a post-health-reform world."
It's true that public hospitals might benefit from the nation's healthcare reform law, which will provide coverage for many more patients. But Moran isn't counting on that alone.
"More of the uncompensated care is now going to have some form of compensation, but at the same time, we see disproportionate-share payments phasing out, and our outlook will depend on how rates are set and access to insurance is provided. We have only a vague understanding of how that's going to work at this point."
A medical home
MetroHealth is staking its future on the patient-centered medical home concept. Its leadership believes that by getting patients into high-quality primary care relationships and facilitating their access to the rest of the system, they'll have patients for life, which also assumes they'll have better influence over outcomes, which will be the key to success under healthcare reform, says Moran.
"If you try to create a delivery model with yourself as an integrated insurance provider, you'll end up with the right answer," Moran says. "My view is we're essentially taking care of 30,000 people who have no insurance, so essentially we are the insurance company. We're not allowed to be an insurance provider—we're a county hospital—but it's more of a philosophical realization."
With that in mind, MetroHealth has worked to enroll its patients in the Partners in Care program, its term for the patient-centered medical home. More than 10,000 of the estimated 30,000 annual uninsured patients who receive care at its facilities are enrolled. That means MetroHealth helps with scheduling appointments, disease management, pharmacy, and other pieces of the care continuum, and is able to see those patients in almost any applicable setting.
One of the keys to future viability for hospitals seems to be making sure patients' first encounter with your health system isn't with the acute care hospital, says Larry S. Gage, president of the National Association of Public Hospitals in Washington, DC. He believes many public hospitals are uniquely in the right business position on healthcare reform, as many already have the pieces that will make up an accountable care organization. But the second challenge for public hospitals may be a little more daunting.
"Our members do have commercially insured patients, but they are about half the percentage of the patient population compared to the community nonprofit or for-profit," he says. "[Public hospitals] have a high level of quality with them and are almost all teaching hospitals, but there is an image challenge that has to be overcome. We have to educate the public who have seen these hospitals as inferior when in fact they are equal or perhaps even superior."
Internally, much work has already been done to make MetroHealth more efficient. Chief Medical Officer Alfred F. Connors, Jr., MD, says MetroHealth "has to become more efficient because the expectation is that there will be more people coming in, but not proportionally more dollars."
The challenge is making sure the system is an attractive option. Part of overcoming that challenge is making outpatient visits more efficient. He expects that means the doctors in a clinic setting will get to see more patients per day. That's where reworking responsibilities will help. He anticipates that physicians will be relieved of some of the work they currently do that isn't direct patient contact.
"They spend too much time doing what the nurse or nurse practitioner needs to be doing right now, but we're changing that," says Connors. "Patients will be spending more time with the team, but less time with the doc."
The changing complexion of insurance coverage is one thing for which Moran is preparing. He predicts that many employers will "look at the government health option and will take advantage of it," meaning a noticeable decline in commercial insurance prevalence in the market. At the same time, he argues that government reimbursement will make up more of the insured population. As commercial enrollments shrink, the practice of commercial insurers making up the difference between what government pays and the actual cost of care will quickly end.
"This process will lead to pretty dramatic rate restructuring for providers like us," he says. "That puts
added emphasis on how you might break even on Medicaid rates. It's a daunting challenge."
Building up the outpatient system will be expensive. MetroHealth took advantage of the financing of Build America bonds, selling $75 million in early 2010, which will be used largely for enhancing its primary and multispecialty clinic presence.
"If you follow the literature on ACOs, it revolves around that outpatient presence and the deliberate attempt to keep people out of the acute care setting through better intervention," says Moran. "We have a pretty dense network of clinics in the urban area, but will have to reach out more to be present for people in other areas."
Because I like to think I am as smart as the next guy, and because it's pretty much my job, I get a kick out of trying to predict what our healthcare system will look like 10 years from now.
It doesn't look good for independent standalone community hospitals, unless your hospital happens to be of the critical access variety. Why do I believe that? Well, think of hospitals in the 30-300-bed category as the hardware store in the middle of town. Think of the bigger, multi-hospital systems as the Home Depots of the healthcare world. Now, before you crush me with comments at the bottom of this page, I'm not saying that it's exactly a direct metaphor for what's happening in healthcare. It's overly simplistic, but stay with me.
So not only do you have organizations with huge resources competing, directly in some cases, with small one-off shops that offer essentially the same products and services, but now you have both parties' biggest customer saying they're going to reward for value and outcomes. Uh-oh. It's not that it's near impossible for smaller hospitals with limited clinical integration and fewer IT resources to offer equivalent care of the Hospital Depots, it's not. And they can. But can they prove it to skeptical payers, employers, and most of all, the federal government? In the new era, data will be king, and if you can't show you're at least as good—and as cheap—as your competitors, you're likely not going to be around long.
I talked to Skip Cimino a little while back. He's president and CEO of Robert Wood Johnson University Hospital Hamilton in New Jersey. He used to be in flooring and tile. But before you judge him as unqualified to run this 284-licensed-bed hospital on that history, he built the company in 20 years from $19 million in annual revenue at its locations in central New Jersey to a seven-state operation with $140 million in annual revenue. He's also served in the Governor's cabinet in New Jersey, but that's almost beside the point. He and his leadership team made a hospital in New Jersey profitable (although a 1% margin is nothing on which he's going to rest). That's probably enough, but in case it's not, the hospital has also won a Baldrige Award.
Given the forces he sees at work in healthcare, Cimino sees perhaps at least three actions community hospitals should take to remain viable long-term, although to be fair, there are dozens more routes an independent can take to remain relevant.
1. Join a system while preserving some independence:
While RWJ-Hamilton has long been part of the Robert Wood Johnson System, which counts the 600-bed university hospital in New Brunswick as its flagship, "everyone kind of did their own thing," says Cimino. "Part of our future will be the ability to clinically integrate with one of the top hospitals in the country, which allows our residents in this area to have top notch care from a tertiary center without having to leave to go to Philly or New York City."
2. Establish a physician council, or something similar, to ensure that you and the docs agree on how to work together.
Ironically, integrating the financial and clinical information systems, which is extraordinarily difficult might be the easy part here. What's more challenging is the change in process and patient care that are necessary parts to effective clinical integration. At RWJ-Hamilton as well as other community hospitals, says Cimino, "we'll have to deal with a far more competitive environment," he says. That requires treating physicians as strategic partners. Cimino established a physician council to help further that strategic partnership. "This is really different from the medical executive committee in that it's about strategic relationships and ensuring that we are dealing with and resolving those in partnership with physicians."
3. Build a focused outpatient growth strategy:
The growth is not in inpatient. If you don't have strong outpatient facilities, you don't have much hope. RWJ-Hamilton created a center for health and wellness years ago, for example. But what might have been seen as a white elephant back then is now a key strategy in diversifying revenue streams and for patient engagement, says Cimino. "This is 88,000 square feet of medically based fitness," he says. It also houses our community education program where we touch more than 150,000 lives."
This is by no means a complete list. If you ignore all this opportunity for innovation, perhaps you still rest comfortably, believing you can make up all your disadvantages with a family feel and a local vibe. The decision on strategy is up to you, but that didn't get the neighborhood hardware store very far.
I think by now, we're past the point of arguing whether introducing complex technology into the healthcare continuum is a good idea. Whether to help caregivers make the right decisions more quickly, to better integrate clinical and financial systems to cut down on waste, government mandates, or a host of other good reasons to automate many parts of the healthcare process, hospitals and health systems are investing as never before in technological innovation.
Besides, even if you're stubborn enough to think it's not a good idea, or, at least, that it's unproven and too expensive, you know the feds are also behind the push. And when a customer that pays the freight for up to 50% and more of your patient flow says "jump," most of you who haven't seen the need for an EMR are now asking, "how high?"
Well now there's a way for you to see how your organization, be it a hospital or health system, measures up to your peers in terms of progress toward the many goals of EMR implementation. In the latest survey on EMR Implementation by the HealthLeaders Media Intelligence Division, dozens of CEOs and hundreds of other leaders in the C-suite talk frankly about how seriously their organization is taking the importance of the EMR.
For instance, you might be curious to find out:
Whether your peers are interested in funding EMR systems for independent medical groups.
How far away your peers are from fully implementing an ambulatory electronic medical record.
Whether your peers' EMR solutions contain a practice management system.
And the depth of the survey doesn't stop there. I was stunned that 4% of our respondents don't have plans to implement an EMR at all. They may represent critical access hospitals, but still. I was also mildly surprised that only 21% of you are confident that you have a fully implemented EMR solution right now. That means there's still a lot of work to do.
It's a short survey, and it doesn't take much of your time to view, but this type of just-in-time market research is essential information for you as you craft your strategic plan and budget your precious dollars toward electronic solutions for your employees, your clinicians, and most importantly, your patients. Best of all, it's free.
I'm up to my neck in surveys lately here at HealthLeaders Media. It's an annual thing in some respects. By that I mean we're putting together our 2011 annual industry survey results right now, but we've also recently launched free monthly intelligence reports that are based on surveys in which hundreds of healthcare leaders give us their opinions and insight about specific challenges surrounding the operation of a successful healthcare organization.
The report I'm working on now regards reform readiness. That is, the level of readiness hospitals and health systems have regarding the new health reform law. There's lots of interesting stuff in it, but on the whole, one broad conclusion from the survey responses struck me: Some of you are pinning your hopes for your organization's long-term well-being on repeal of the Patient Protection and Affordable Care Act.
You see massive additional government regulation, reduced reimbursements, and pressure on your margin for the foreseeable future. Those are legitimate concerns regarding the law. Perhaps you're hoping the results of the election will mean the next Congress will repeal it, and you won't have to deal with it at all. The law is certainly not in any way perfect, and several of its provisions—mainly the long-term viability of the insurance mandate and the accompanying coverage increases—seem programmed to fail as they are currently written. But it is a law. They're tough to pass and tough to repeal.
I'm not saying a full repeal is impossible, but it's unlikely. Furthermore, pinning your hopes on repeal is not a strategy, it's a bet, and the odds are not in your favor.
However, the innovative and forward-thinking among you show yourselves not by ignoring the Act and hoping the regulations that will come with it go away, but by taking the broad themes of what the law is supposed to achieve (making healthcare a cheaper and higher quality service), and focusing on ways to achieve those goals. That, by contrast, is a strategy that doesn't directly depend on regulation or reimbursement rates, and it's one that will serve you and your organizations well, regardless of whether pieces and parts of the omnibus Act are rolled back or not.
On the surface, many of you feel that by improving quality, your reimbursement per unit of service will likely go down. That's one issue. On the efficiency side of the ledger, however, many studies have shown that healthcare still has a long way to go. From electronic medical records to better contracting strategies, improving your institution's efficiency is a winner regardless of the regulatory environment. It's simple math. The cheaper it is for you to provide a service, the more of the reimbursement you get to keep. What's so difficult to understand about that formula?
I realize improving efficiency isn't something the Act even indirectly addresses, except in various demonstration projects, but it's a strategy for dealing with the funding challenges the new law will bring, even if its scope is whittled down by the new Republican strength in Congress.
Impending changes in regulations in such a highly regulated industry can be a tempting excuse for inaction, even if, as a leader of your organization, you're not consciously sitting on your hands. In the larger economy, many explain the high unemployment rate as a function of the uncertainty about various reform attempts from finance to healthcare. Companies don't want to make the investment in people, the reasoning goes, if regulation makes it potentially too much of a gamble to hire people when federal regulations that in part determine an employee's cost seem so capricious and quick-changing. But the fact is that excuse just doesn't fly. The regulatory environment is always uncertain. What's always true is that improving efficiency goes straight to the bottom line.
Look at your processes. Healthcare is complex, true, but its delivery need not be as complex as it often is. Re-engineering processes takes time, and takes people offline for periods of time. But a thorough re-engineering of inefficient processes at an already successful children's hospital showed a five- to eightfold return on investment, and it probably incidentally improved patient satisfaction scores and quality. So there's always room for improvement.
I'll have more on this particular case later, but with that kind of ROI staring you in the face, there's no excuse for inaction simply because the healthcare overhaul that you all thought you were getting now seems like it might blow up under new political leadership in Congress.
A hospitalist not employed by a hospital sees an average of 19% more patients than his or her institutional counterparts, according to the Medical Group Management Association. So productivity is seen as better, but do they cost less? Are they easier to manage?
For Bill Gorski, MD, president and CEO of SwedishAmerican Health System in Rockford, IL, the answer to both questions is an unqualified yes.
His two-hospital health system, which also boasts a network of 17 primary and multispecialty physician clinics, began a hospital-managed hospitalist program with seven doctors in 2000. By 2007, frustrations with productivity and financial losses led to a discussion with IPC: The Hospitalist Company. A contract signed that year provides hospitalists and meets quality and patient satisfaction targets determined by the hospital, which now has 13 outsourced hospitalists.
"A good part was our issue on how we set it up and compensated docs," says Gorski, who explains that physician compensation under the employed model was based more on shift work than productivity. "From a productivity perspective, it just wasn't cutting it. At one point, [hospitalists] had seven days on and seven days off and only a minimal census. That just wasn't working for us."
As salaried employees, with virtually no compensation at risk for quality or productivity targets, SwedishAmerican's prior program was much less efficient, and ultimately more costly, Gorski adds. Morey Gardner, MD, is program director of the internal medicine residency program as well as director of the department of internal medicine at SSM St. Mary's Health Center, a 582-licensed-bed community teaching hospital in suburban St. Louis. It signed a hospitalist contract six years ago.
"In the absence of a close partnership, we would not have outsourced it," he says, emphasizing that at a teaching hospital, hospitalists "play a critical role because they have to contribute to the educational experience and be appropriate role models for the trainees."
Gardner says the partnership helped save an estimated two years of effort to develop an in-house program. SSM St. Mary's did not have an established structure for billing and administering hospitalists in an in-house program, and didn't have an experienced hospitalist who could serve as its head. He says the contract, as written, allows time for St. Mary's hospitalists who have an interest in the teaching component of the hospital to do that.
"The business component is taken care of by an experienced organization, and academic hospitalists are able to provide a careful intellectual approach to patient care that included the ability to educate residents," he says.
For smaller hospitals, contracts with hospitalist companies, which are typically three to seven years in length, free the hospital from the onerous tasks of hiring for and managing such a program. Could they cause problems on the back end, when contracts need to be renegotiated? Perhaps, but there is fierce competition in the space.
"The contracts with IPC include certain protections that allow us the opportunity to retain our key academic hospitalists should there be any disruption in the relationship with IPC," Gardner says, adding that IPC recognizes "the importance of that type of protection to the residency program."
You've got a lot of re-engineering to do. The Patient Protection and Affordable Care Act promises nothing less than a tectonic shift in the way your organization is paid and otherwise incented, whether you lead a health plan, physician practice, hospital, or health system. It's not hyperbole to say that survival is on the line for many such organizations.
Meanwhile, you get to soldier on under a highly regulated current system that essentially pays you per unit of service, with precious little of the equation connected to quality. Your payer mix is getting ready to change, and not for the better it appears, in many cases.
One only needs to look at the Massachusetts experiment with near-universal healthcare for a road map as to how things can go wrong when such a large number of people instantly get health insurance and overrun an already taxed primary care system. And oh yeah, that state's insurance exchange, meant to manage the risk of bringing so many uninsured under the umbrella, is hemorrhaging money, thanks mainly to political cowardice relating to penalties for not meeting the individual insurance coverage mandate.
Bricks and mortar expansion to meet this expected new patient demand, depending on what form it takes, is expensive, and it takes years to come online from the planning stage to construction. Meanwhile, more attention will be paid—and less money, too—for outcomes that don't reach or surpass some minimum standards, many of which are yet to be written.
And on top of all that, 20 million people will still be uninsured in this country (mainly illegal immigrants and a few other small groups) even when the major insurance provisions in PPACA go into effect. Of course, that group's lack of insurance doesn't mean you don't have to incur the expense of treating them, like always.
But despite all these storm clouds on the horizon, there is a silver lining. Healthcare is about to find out, as so many other industries have, that offering a quality product or service at a competitive cost means your services will always be in demand, and that eventually, you'll be paid fairly for them.
As I talk to senior leaders across the country during the course of my job, that's the positive attitude on which the overwhelming majority of my sources seem to be leaning. Color me surprised as I've encountered this attitude time and again. I've been conditioned, covering healthcare for a decade, to (understandably) hearing wailing and gnashing of teeth by the government regulation change du jour. But instead of focusing on the negative, many CEOs are seeing the new normal as an opportunity, as befits leaders' generally optimistic personalities.
Chris Borr, as the vice president of marketing for McKesson, one of the industry's largest IT companies, hears frequently from his colleagues about individual stories of innovation that are still in the early stages of execution.
For example, while he hasn't seen any really bold moves to address the accountable care organization concept central to PPACA, he sees opportunities for innovative healthcare leadership to define those organizations, while regulators provide a framework in which hospitals, health systems, health plans and physician practices fill in the blanks. Many organizations are beginning to debate what an accountable care organization actually is.
"There's a myriad of structures that it could take and it's still a definition that's waiting to be written," says Borr. "That's an opportunity in many respects. The government doesn't have a good track record in defining or prescribing how care should be delivered, but they do have a good record on setting minimum expectations that allow the market to figure it out."
Borr's not overly concerned.
"There's no alarm with [ACOs] that they aren't tightly defined," he says. "That's actually a benefit."
The other thing that's glaringly apparent is the level of concern in being able to place large bets for their orgs with very little information to back up the decisions on where to place those bets.
If you read the tea leaves, they aren't falling in favor of small primary care physician practices. Squeezed by high overhead and falling reimbursements for years, many of these physicians have simply given up—retired—or moved on by selling their practices to larger institutions like large group practices or the local hospital. That's not a bad model, necessarily. There are lots of physicians who are relieved at the ability to leave behind the small business headaches associated with small practices of one to a few doctors.
But others want to improve as much as those in the big practices and hospital-based situations, yet remain independent, and they're finding that creating the elusive medical home for patients—a move that is as much about practice health, given the reimbursement climate, as the patient's health—does pay off, to a degree. Count Joseph Mambu, MD, 62, of Lower Gwynedd, PA among that group. I caught up with him recently as he was driving to a house call. Yes, you read that right. Mambu makes house calls, frequently because he's the only thing between his patients being homebound and hospital-bound.
He's the only full-time physician at Family Medicine, Geriatrics and Wellness, and although he has two part-time physicians to help him with his patient load, the key is computerized patient information, and the team of caregivers with whom he's surrounded himself. Critical to Mambu's practice, and to lowering healthcare costs nationwide, is the chronic care population. Mambu, who is also a geriatrician, says he's never been satisfied with the way healthcare deals with this highly expensive patient population, but he's never found a good way to coordinate that care until relatively recently.
He's been a family practice physician since 1976, and was in a group practice model for 22 years. Back in 1998, he sold that practice to a local hospital, thinking being part of a large health system would be a model to get coordinated care for his patients. In short, it wasn't, at least at that time.
He says the local hospital, which he wouldn't name, did a terrible job of human resources and micromanaged the practice to the point that he decided to leave after 2 1/2 years. He sees that bad experience as a blessing now.
"Had they not mistreated me, I wouldn't have had the gumption to start my own practice and would have never gotten involved with this [patient-centered medical home] movement," he says. "I always wanted to do this; it just took me 25 years."
So at age 52, he realized that if he didn't launch his own practice and help develop a model for coordination of services for chronic care patients, "it was never going to happen."
He opened a small office, hired a nurse practitioner and a scheduler, put an ad in the paper noting that he did house calls, "and the practice came back to me."
The big opportunity to transform his practice came in 2005, when Family Medicine, Geriatrics and Wellness was the only practice in the state chosen in a nationwide demonstration project initiated by the American Academy of Family Physicians, which was seeking innovative ways to revamp primary care into a team-based structure.
"The chronic care model backs into the patient-centered medical home construct," Mambu says. "It's the key to healthcare reform and the transformational design for primary care growth for the next several decades."
Among other initiatives, such as installing an electronic medical record, Mambu filled out his practice not with other physicians, but with physician extenders. Mambu has two RNs who are "case managers slash health coaches slash office-based experts." Three nurse practitioners help Mambu and his part-time physicians with the caseload, and with managing patients' health and compliance so that they don't have to go to the hospital.
"I'm working myself into the ground," he says, "but I'm loving every minute of it."
What he thinks his practice is modeling is that patient centeredness will help cut costs by improving the patient-doctor relationship, "because that's the power of this model," he says. "Reestablishing that trust and guidance and having the time to guide and coordinate care, which has been lost for most physicians because we don't talk about value, we talk about volume."
Because of the demonstration project's funding, he was able to undertake much of the transformation. Other small practices clearly aren't as lucky because they weren't early adopters, he says, noting that producing outcome and performance reports is impossible "when you jot something into a chart and put it on a shelf. EMRs really don't make it easier to document—it's very burdensome to put in the data and make it good, but the beauty is that it can be retrieved and tabulated and analyzed. If you don't measure it, you can't manage it."
Next year, he's counting on bonuses from Medicare for e-prescribing and physician quality reporting which will translate to a "10% bump in Medicare next year, and $18,000 for meaningful use."
Some of the commercial plans he deals with are paying a little more for his services than for others who can't prove quality outcomes, but "I don't think it's enough," he says. "They might have to give a pay raise for primary care docs to help pay for the aggravation that goes on in switching to a value from volume basis. No one wants to volunteer to do this. It's something I had to do."
He hopes that other small practices won't despair that they can continue to exist under healthcare reform, because he sees small practices as an essential part of the continuum of care.
"I hope the smaller practices never go away, and I hope there's not large corporatization of medicine," he says. "I've had to exert a lot of leadership and we're struggling to keep current with the cost of having two nurses, three nurse practitioners and the cost of investing in an EMR. It's Marcus Welby with computers. It was expensive to do what we did, and there's no real reimbursement--salaries haven't gone up—but we're not in it for making lots of money."
Patient centeredness doesn't always mean doing what the patient wants, he adds. Instead, it's about having the time to re-establish a relationship and understand what's going on through the patient's eyes in the context of community and support systems.
"This is team medicine. It's a very difficult, time-consuming transition but it's one that docs are going to have to make."
A recent Department of Justice lawsuit threatens the "most favored nation" clauses common to many insurer contracts with healthcare providers. Attorney Dale Grimes of Bass, Berry & Sims discusses the potential upheaval associated with this contracting mainstay. [Sponsored by Emdeon]
I'll bet all of you are nodding your heads vigorously, especially if you're having a particularly bad day. But let me finish. I'm not talking about working a few days a month in a consulting role, or transferring your title to the next rising star inside our outside your system, and taking your place on the board of trustees. I'm talking about really retiring, and going away, and not meddling in the affairs of your former hospital or health system unless somebody asks you to. Maybe not even then.
I'll bet not so many heads are nodding now. Not many of you would find this type of retirement fulfilling. Most of you have spent so many years and hours working the daylights out of your position that not having anything to do with the hospital or system you so recently led would be out of the question. But it's probably what you should do—at least for a couple of years. Why? Because your involvement could be damaging.
That's the take of the Conference Board, anyway. Their data, however, is drawn not only from the world of healthcare, but from publicly traded companies, so take their wisdom with a grain of salt. Their conclusions come from analyzing 358 cases of CEO turnover at S&P 1500 firms over a three year period (1998-2001). So the data's old, but it has to be in order to draw long-term conclusions from the effect of former CEO involvement.
In short, it finds that companies that retained former CEOs on boards have relatively lower stock returns than companies whose CEOs continued as chief executives.
"Retention as a board member has important consequences for subsequent board decisions and post-turnover firm financial performance, since delayed departures often appear to restrain the maximization of shareholder value," the report says.
Fine, so is it applicable for healthcare? I think it can be.
Granted, hospitals and health systems most often aren't about maximizing shareholder value. So I'll grant that point, although I argue it's a semantic one, to a large degree, because what are they about? Fulfilling their mission to provide care for those who don't have the means. Providing great patient outcomes, hopefully. Providing great patient experience too, so those patients will tell others about their great experience. Isn't that a form of maximizing shareholder value?
CEOs at nonprofit hospitals and health systems still have to run their institutions like a business. The old saw "no margin, no mission," didn't come from nowhere, after all. In fact, at nonprofit hospitals and health systems, it might even be more important to maximize the margin, because you are pretty much required to lose so much money every year on a certain group of patients, or a certain group of services.
So what does that have to do with whether you should stay on in some sort of leadership role after you retire?
I think it depends on the person. If the former CEO is gone, there's no worry about whether he's overstepping his bounds by having weekly chats with his successor. There's no worry on the outside of the organization that he or she is really pulling the strings behind the scenes. There's no concern that the physicians or others in the organization won't see the new person as the "real" leader.
It seems there are fewer opportunities for problems like this if the old guy leaves everything up to the new one.
Ride off into the sunset. It'll probably better for everyone involved.
In case you hadn't noticed, many physician specialties are in store for reduced reimbursements in the years ahead, as we transition to a payment system that is less and less reliant on fee-for-service and more focused on patient outcomes.
That leaves independent physician practices in a bit of a predicament. Sure, if you lead a practice, and if you're a smart planner, you're spending all the time you can to get your electronic medical record implemented in a "meaningful" way, if you know what I mean.
You're also reordering your staff's work priorities so that your high-dollar clinical employees spend time with patients, not with paperwork or scheduling. But you should also spend some time looking over your real estate, building, and operations costs as well.
That might mean scouting new locations if your practice is expanding, as has been the case for the (Portland) Oregon Clinic over the past two decades., Administrator Philip W. Armstrong sought savings wherever he could find them, and in building a new location for the expanding practice, he looked into green building techniques not only as public responsibility, but also as a way to save serious cash.
If you're looking for the epicenter of the green building movement, you could do worse than pinpointing your map to Portland, where the Oregon Clinic is among a swath of businesses that are using green techniques in construction and saving money now. The multispecialty group practice has grown from 40 physicians at its birth in 1993 to 125 now, and by 2006, the location where its specialists are housed was outgrown.
With a need for a 100,000-square-foot medical office building, Armstrong knew he had the critical mass to make a LEED-certified building pay off. LEED stands for Leadership in Energy and Environmental Design, and the organization provides third-party certification for certain stages of environmentally friendly architectural and structural design.
Basically, it measures how energy efficient and environmentally friendly a building design is, and while the certification isn't always a tool to save money, that's exactly what happened in the Oregon Clinic's case.
LEED is relatively new in healthcare, says Armstrong, who completed the building in late 2006, and is just now able to do some cost benefit analysis on the features of the clinic's new medical office building.
"A lot of the initiatives have historically been used in commercial office building settings, and with the different requirements that medical construction has, some didn't transfer well," he says.
That meant being inventive with design.
"The interesting thing is you can't tell it's an environmentally friendly building just on a cursory glance," he says.
The main initiatives that got Oregon Clinic the coveted "Gold" certification from LEED are invisible to the viewer, but not to the bottom line.
Rather than having rain runoff (with which Portland is unusually blessed) diverted to the storm sewer system, it goes directly into a storage tank which then uses the water for flushing toilets and irrigation. It's a seamless system, and when the tank gets low, usually toward the end of summer, it automatically switches the toilets to city water. The tank can also be used for watering of outside vegetation, if necessary. That saves the clinic about $5,500 annually on its water bill.
Further, heating a cooling are optimized by timers, better insulation, and the use of natural light, when possible. The clinic saves about $20,000 a year over a conventional building on lighting and HVAC costs. Further, it used recycled materials when possible on other construction needs.
"One of the lessons is it takes a good year to get all the energy options really effective," he says.
Armstrong cautions that the payback comes over time, but it won't take long, given that he estimates 25% annual savings in utility costs over a comparable traditional building. Further, at least in Portland, the clinic qualified for significant business energy tax credits, which are returned to the owners, the physicians, in the form of offsets.
Armstrong knows the annual savings are a drop in the bucket compared to the projected impact of reduced reimbursements, but "they do make a difference."