I had planned to write this week about Medicare fraud enforcement, but recent events have made that impossible. I live in Nashville, which got nearly 20 inches of rain in just more than a 24-hour period last Saturday and Sunday. I've never seen such devastation firsthand.
My family was lucky. We have a rental house and a house we're remodeling to move into, as well as our current house. Among all of those projects, we're pretty much tapped out financially. But we were in good shape to move into the new place next week, with both houses rented as of June 1. So much for security, or what we thought was security.
As I woke at 7 a.m. Sunday morning to rising water in the basement of the house we live in, I saw our world crumbling around us and our dreams in the balance. My wife and I started bailing out the basement while her stepbrothers gathered a sump pump and the last generator from Home Depot (our power was out too). It was futile. We soon began piling up our living space with all the stuff stored in the basement. Finally the rain stopped, and the floodwater stopped flowing in faster than we could get it out. I spent the next 72 hours in rubber boots and covered with mud, setting up sump pumps at the three houses by wading through waist-deep water with live extension cords, and hauling ruined stuff up from the depths. I have the battle wounds to show for it—raw rings around my legs from the rubber boots, and scratches and scrapes of all varieties. And we don't live anywhere near a body of water or any streams. Raging torrents of water just appeared everywhere.
I'll stop here and say that it may not sound like it, but we were lucky.
Many of our neighbors have not yet been able to reoccupy their houses because the water ruined their electrical panels and got into the living space. Many people in the area who do live near a body of water still haven't been able even to visit their homes. We're on water conservation because one of the two water treatment plants here was inundated and still hasn't yet been repaired.
We write here at HealthLeaders Media about the leadership planning necessary for vital services such as hospitals in the face of natural disasters like this. All of the hospitals in this area appear to have made it through largely unscathed. Why? Luck? That was part of it. But can you plan for a 500-year flood, as meteorologists are calling this event? Our hospitals did, and they're to be commended for being able to continue to operate during this dangerous flood.
In short, as a homeowner, you probably can't plan for such a flood--although we're sure going to try following this by installing permanent sump pumps (which, by the way, won't operate when the power's out) and purchasing a generator. But a hospital leader simply must take those steps of preparing for the unlikely. We didn't have time to do anything but react when the flood came. Neither will you. That's why your disaster plan must come up with every imaginable contingency so that resources will be available. What have you done to plan for the unlikely?
You never know when your disaster plan might be the only thing between you and oblivion.
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If you haven't heard about the personal failings and bad judgment of Paul Levy as CEO of Beth Israel Deaconess Medical Center, welcome back from your volcano-lengthened, month-long unplanned trip to Europe.
The latest comes from the Boston Globe. Sources tell the newspaper the CEO will probably have to pay financial penalties for undisclosed lapses of judgment in a personal relationship with a female employee. I don't even want to get into the problems with the way the hospital and Levy have handled this disclosure, my colleague Marianne Aiello had her say on that earlier this week, but rather, to discuss whether any leader—no matter how innovative or dynamic—can effectively govern an organization once his or her episode of poor judgment has been revealed. He's apparently going to get the chance to find out.
Levy, a self-described champion of transparency, isn't talking about the matter officially, and neither is the board, so we're left to wonder about the details of his bad judgment. He has, however, apologized to hospital employees in an email, so enough details are there that anyone could fill in the blanks about what likely happened.
As if running a hospital isn't tough enough, some senior leaders seem determined to make it tougher still. Levy's personal failings are Exhibit A, but he's neither the first nor the last leader who has been caught behaving inappropriately. The amazing thing about the story is not that the board is standing behind Levy's leadership—much of the time, public humiliation seems to suffice as the pound of flesh we extract from our leaders (see Clinton, Bill), but sometimes, if not often, these leaders pay with their jobs, not to mention their marriages.
We all have personal failings. It's not my place to judge what Levy did or how he was found out—turns out he was exposed by an anonymous letter—but to remind senior leaders that more is expected of you and that people are watching. Surely those of you in the CEO's chair know that, but in circumstances like this, I really wonder. Further, in a way, I feel bad for him. I'm wondering whether despite all of Levy's successes at Beth Israel Deaconess, his leadership position has become so compromised as to render him ineffective going forward.
He's to be commended for helping to lift the veil on what goes on in a hospital's leadership suite. He's to be celebrated for turning around a hospital that was losing as much as $280 million between 1996 and 2004, when the Levy-led leadership team returned to operating profits.
The hospital's board clearly does not think he will be ineffective in the future, at least at this point, but these things move quickly. But let's spend a little time on this issue. The CEO is the person who must hold everyone else accountable. He's written about a doctor for wrong-site surgery on his blog, for example. Now, he's on the other end of the shame spectrum. He's had to write an ambiguous email of apology—one that sounds like former Yankee Jason Giambi's infamous apology—we guess for using performance enhancing drugs.
Though his apology has been accepted, I doubt anyone's going to make him team captain. Now, with details of the Levy situation coming out in piecemeal fashion, he still has to walk the halls with a painted-on smile—knowing there has to be a lot of snickering going on behind his back. How does he deal with going out of town for business reasons? How does he deal with the eyes upon him when he goes to shake a young woman's hand?
Right now, the board is discussing whether to require Levy to repay the hospital for a severance package that was given to the woman when she left her job last year at Beth Israel Deaconess-Needham, as well as withholding bonus money from him this year.
Well, it's a start.
As a CEO, you make enemies. It's unavoidable. People who feel marginalized by your power—no matter how lightly it's wielded—look for ways to exact little revenges. In this case, one of those people used an anonymous letter to do so. Your only recourse is your good faith and your honesty. If those are compromised, your leadership position can quickly become untenable.
In this particular case, I'm not sure whether Paul Levy can continue his run of success at the hospital. The damage goes well beyond the limits of the person, of course, because he's the leader of one of the most important healthcare organizations in the country. How does one calculate the losses that Beth Israel faces in terms of developing teamwork among its clinicians and staff? How does it calculate the perceived loss of political capital from Levy's personal missteps? What happens the next time its CEO is confronted with a tough decision about layoffs? Nobody knows, but we're going to find out.
Like attempting to place a dollar value on a reputation, those losses are incalculable, and paying them back is next to impossible.
Yet they exist.
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If their lobbying group is truly representative of its membership, hospitals are very unhappy with a hospital inpatient and long-term care prospective payment system proposed rule for fiscal 2011 that would cut average inpatient payments by 0.1%. Unhappy, but not desperate.
A tenth of a percent cut doesn't sound like much, but the American Hospital Association says if the proposed rule is allowed to stand as is, billions of dollars would be taken out of the system just as hospitals are grappling with sweeping changes and payment reductions contained in the new health reform legislation.
Besides, says the AHA, the estimate does not include the 0.25% mandated market basket cut that was included in the healthcare reform legislation signed into law last month. When that cut is put into place, average payments will decrease by 0.35%—compared to fiscal 2010 payments. So now we're up to a little more than three-tenths of a percent cut for 2011. I won't argue that 0.35% isn't real money for hospitals operating on a 1%-5% annual margin—if they're lucky. If they're not lucky—or good—many hospitals, including those that are incurring annual losses already, will have to reduce the amount of care they're able to provide to patients.
Let's be honest. With apologies to the AHA, I thought cost reduction (through quality improvement) for healthcare services and supplies was exactly the point of the health reform law. The idea was to streamline, but not to cut patient care.
At least that was the stated goal, but the real goal appeared to be to cover more of the uninsured. What level of coverage, and at what reimbursement rate, was the underlying issue that none of your elected politicians would touch with a 10-foot pole in the agonizing run-up to the law's final passage, and during the interminable negotiating process, I never heard much about future reimbursement from the associations of industries that would be affected under reform.
Look, no one likes to be told by their main payer that they'll get a cut in reimbursement, no matter how small, for the services they provide, especially at a time when prices for supplies, salaries, and energy, among other necessities for hospitals, aren't falling. Similarly, the biggest payer out there can be something of a bully.
Hospitals, like many other healthcare service providers, are caught in a pretty strong trap. They can't consider a draconian response of their own by cutting government out as a payer for a variety of reasons. Or can they? I would argue that many, especially in the long term, can at least consider it.
Many large academic medical centers are probably not able to consider this "nuclear option." They operate teaching programs that are big money-losers but that are necessary to bring along clinicians of the future. They're already constrained, through capital investments whose cost is fixed, to treat a certain volume of patients. And besides, even if they lose money on government patients, commercial patients have picked up the slack—at least up to now. But community hospitals, as well as big chains that don't operate AMCs, may be a different story, although they share the volume challenge. Certainly they can't consider cutting out government in the short term, but can they in the long term? I'd argue that some can.
Physician offices, in drips and drabs, are already doing it. The bottom line is as a hospital or health system leader, you have the power—and the responsibility—to keep your organization running as smoothly and as profitably as is reasonably possible, while still maintaining your mission to care for patients in the community. But that doesn't mean you have to deal with a payer that doesn't pay its weight.
Sure government, through its size, can attempt to strong-arm the entire industry. But until now, hospitals have been crying poverty and lobbying their representatives to pull CMS back on some of its proposed payment cuts. That's been pretty successful, but the nuclear option is to figure out a way to get out of the government's clutches.
Frankly, I don't see a lot of that happening. The cuts are something you'd rather not have to deal with as a leader, but the alternative is extremely risky. Still, I would expect that some hospital leaders might read the tea leaves and if they're operating a community hospital or network of community hospitals that's less dependent on government payers, that they would look for ways to exit that system long-term. That might mean they wouldn't be nonprofit anymore, but we are looking at bold strokes.
My point is that if the proposed cuts are truly as destructive as some would have you believe, there are options. It's just that we're not anywhere close to having anyone realistically try them. Still, look at Europe. There are lots of hospitals that don't take government reimbursement. They're called private hospitals. I wouldn't be surprised to see them sprout up here if the reimbursement system gets a lot worse. But we're not anywhere near that point now.
So maybe for now, it's time for hospitals to just deal with it.
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Some hospitals and most physician offices are worried about the proliferation of in-store clinics, and have been for some time now. But despite the fact that they don't make money for many of the grocery and drug stores that offer them, they're not going away.
On the contrary, they're growing by leaps and bounds, and Tuesday's story about plans by CVS Caremark Corp. to double the number of in-store medical clinics it operates within the next five years only reinforces that view.
As a group, hospital leaders aren't worried they will lose a lot of business to such clinics—they offer vastly different services, after all—but they know the clinics have the potential to hurt their branding strategy, especially health systems that have a variety of outpatient offerings.
For example, these MinuteClinics are proliferating at CVS stores, with CVS's brand name getting the exposure. To that end, many hospitals have tried to lock up their service areas through deals with retailers to provide clinicians and supervise these clinics in return for carrying the hospital's brand name. That's smart.
Physician practices, especially family medicine and other primary care areas, are worried too, but not for the same reasons. The threat to them is a lot bigger.
Nationally, their associations call for regulations to be imposed on the clinics, from requiring them to have direct physician supervision to more draconian regulations—all the way to outlawing them entirely. Their stated fear is that such clinics could lead to a reduction in patient care standards, and that so-called physician extenders aren't qualified to make recommendations for patients who mostly visit the clinics outside normal business hours for minor ailments like a child's ear infection or the common cold.
They also seem to have a visceral objection to potential conflicts of interest between the caregivers and the store that supports them—in other words, they fear that such clinicians will push patients to purchase expensive drugs and other treatments from the stores that house them. I think that pressure is more subtle, patient purchasing decisions will likely have a lot more to do with convenience than any push from caregivers.
I have no problem with noting the conflict, but where were these physician groups as hundreds of their members, physicians all, began offering much more expensive office-based ancillary services, such as imaging, in which they have a financial interest? In any case, that argument seems like a dead end, because it's not the true reason independent physician practices feel threatened.
Really, the argument is about market share. After all, CVS admits the clinics can't stand on their own financially. They're a loss leader for getting more traffic into the drugstores. But clearly, they do drive traffic, and sales, in the store.
With about 500 clinics in 25 states, CVS alone has already made a huge dent in the market, and as more people gain insurance under the healthcare reform law and as the population ages, they will continue to proliferate. Why is that a bad thing? We clearly don't have the number of primary care physicians to treat these patients when they gain insurance.
The real question is whether physician offices, many still mired in paper processes and banker's hours, will adapt. It doesn't make sense to directly compete, because of the loss leader problem principally, but also because a small physician office can't begin to directly compete with a behemoth like CVS.
In fact, many hospitals can't compete with national chains. That's why they have formed partnerships with such clinics as a way to get their brand associated with all phases of medical care in the communities they serve.
So if it's smart for hospitals, it's also a smart idea for primary care practices—especially those with the size and scale to look for ways to collaborate instead of compete. You won't make money on the clinic itself, but you'll certainly find that patients will think of you when they have minor ailments as well as bigger ones. Alternatively, you could develop after-hours access on your own.
Obviously, the conundrum is figuring out how that can be done cost-effectively. But unless physician associations are successful in outlawing such clinics, they will have to find a way to compete because it's about serving patients when they need to be seen. The bottom line is that under a system where more people have insurance, and where lower-tier medical care has become commoditized to a significant extent, being available to patients outside of normal business hours seems essential for primary care physician practices.
That is, unless you want to work for the local hospital—or CVS.
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When St. Vincent's Hospital Manhattan announced midweek that it would be closing, the news wasn't especially surprising, but it was still a sad day for hospital leaders everywhere.
The hospital has been struggling for years. With no buyers on the horizon, $700 million in debt and in default on its Chapter 11 restructuring plan, the 160-year-old hospital made the inevitable decision to close.
Being in the heart of New York's Greenwich Village and given its long history of providing charity care to the city's most vulnerable population, St. Vincent's board of directors simply couldn't wait for healthcare reform to kick in to see whether that might save its sinking ship.
To be sure, many of St. Vincent's problems over the past couple of decades have been self-inflicted. Bad management in the past had put the hospital in a hole that it couldn't climb out of. But its ultimate failure can't be pinned solely on management.
Its payer mix had been declining rapidly in recent years, as paying patients avoided the island's hospital of last resort. Its small size relative to its competition didn't help, nor did the rash of highly-paid consultants who have run the hospital in place of permanent leadership for years.
Its ultimate failure should be considered a failure of all of us to collectively deal with the endemic problems of medical centers like St. Vincent's all over the country. Until recently, hospitals have rarely closed. They're kept alive, propped up by all manner of stopgap, Band-Aid solutions by politicians who rightly feel that their constituents might blame them if the hospital were to close. And indeed, our elected officials do bear some of the blame for the fact that Medicare and Medicaid don't fully pay for the cost of care.
Cross-subsidization, which many hospitals rely on to cover the cost of treating the uninsured or patients with government payers, is on the wane, which is why I don't hold much hope for the healthcare reform law to change the fate of hospitals similar to St. Vincent's.
Indeed, Massachusetts' experiment in dealing with the uninsured hasn't helped hospitals with their cross-subsidization problems. While many more people are insured, Massachusetts' Medicaid has ratcheted back its payments per patient, meaning the pool of money to treat patients hasn't gotten bigger while the pool of patients has.
That means hospital survival is still a zero-sum game. So we're left with at least two lessons from the St. Vincent's failure, neither of which is particularly heartening for struggling hospitals of last resort nationwide. The government giveth with one hand, and taketh away with the other.
Struggling hospitals can't really take much heart from the decline in the uninsured that will result from healthcare reform legislation. They must transition to the new system over the next four years, over which time the majority of the legislation's provisions will kick in. But they don't expect a windfall in revenue from the new legislation, and they shouldn't.
Look at the bill closely and you'll see there isn't much, if any, new money in the system. It's just spent differently.
Those that want to survive will still need to subsidize the money they lose on the indigent population with commercial payers, and that model appears broken. Perhaps the only way many hospitals can survive that fit the mold of St. Vincent's is to reduce their cost of care. That's very difficult to do, especially for standalone hospital systems like St. Vincent's.
I fear we're looking at the prospect of many more St. Vincent-like implosions over the coming years, only they won't get the press. The uninsured will have insurance, but where will they go?
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St. Luke's Episcopal Hospital in Houston didn't need a massive healthcare overall to reform care. Its Stroke Partners Network is at the vanguard of the collaborative, cost-effective kind of care that helps more patients survive strokes and prevents suffering and hospitalizations. And by the way, it's a profitable business model, both for St. Luke's and the hospitals in the network.
About a year ago, St. Luke's, which has a comprehensive stroke program that's among the best in the country, began a discussion with consultants from GE Healthcare that led to the network. Essentially, it provides 24/7 stroke expertise from St. Luke's clinical team to hospitals in the hinterlands, who might receive a patient with a stroke for whom time is of the essence for effective treatment.
Of the 409 hospitals in Texas, almost 300 have been designated as having limited capabilities to treat patients with complex neurological disease, such as stroke. Yet, 80% of the state's stroke patients are seen at these hospitals. That means the majority of these patients aren't getting the best treatment available for a time-sensitive affliction.
A 63-year-old grandfather and resident of Vidor, TX, near the Louisiana border, suffered a stroke at home Jan. 23. More than three hours from Houston, his wife took him to their local community hospital, CHRISTUS St. Elizabeth's, which has limited stroke capabilities. But because St. Elizabeth's is involved with the St. Luke's system of care, through telecommunication with St. Luke's, local physicians were armed with expert guidance and the most aggressive treatments available to treat the man.
Through collaboration with the team at St. Luke's and Baylor physicians, local physicians dissolved the clot that was causing the stroke and bought him time to be transported safely to St. Luke's for surgery.
Less than a week after his stroke, he walked out of St. Luke's with minimal affects from the stroke and surgery.
The outcome most certainly would not have been this positive had the system not been in place. The system of care St. Luke's developed took a standalone program and essentially started a business that allows underserved communities to access this advanced stroke care. In return, St. Luke's gets referrals for the most serious events.
St. Luke's now has a target list of 54 hospitals they think would work well to funnel patients to it, once primary treatment is given at the local hospital. Three other hospitals besides St. Elizabeth's will go live with the telemedicine system in May and June, but as many as 54 could be targeted for inclusion.
Hospitals like St. Luke's often fear that when they create this type of relationship, the sending hospital will only forward patients who cannot pay or patients who will end up severely disabled, which from an outcomes perspective doesn't help St. Luke's. But St. Luke's designed systems and structures designed to keep participants from “gaming” the network.
For example, St. Luke's doesn't partner with any hospital that does not have all of its clinical staff trained and certified in the National Institutes of Health's stroke scale. That ensures that the folks making decisions 100 miles away are trained in stroke best practices. The partners have quarterly governance meetings, where they discuss metrics, performance, and outcomes.
As of mid-March, St. Luke's and its partners have had between 20 and 30 “activations” of the network since the beginning of January, which resulted in nine transfers to St. Luke's. Of those nine, five had advanced procedures.
That's likely five lives that won't be destroyed by stroke, and five people who can resume somewhat normal lives, instead of being confined to a terrible fate of wasting away in expensive long-term care.
This type of collaboration cuts cost and improves quality, and isn't that what healthcare reform is supposed to be all about?
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I was surrounded by thousands of healthcare executives this week as we attended the American College of Healthcare Executives' Annual Congress. I've been to dozens of these shows over the years. Most of the time, they're coincidentally held when nothing much of substance is coming out of Congress healthcare-wise, which is to say, most of the time.
Not so this year. Not only did we witness from afar the most sweeping healthcare legislation passage since 1965, but we got to see it happen in real time.
I was amazed at how quickly some of the presenters and attendees were able to react to what portions of the bill meant to hospitals and health plans, but even they were at a loss for bold predictions. Slide decks were rearranged, added to and deleted from. But the picture for healthcare businesses, especially hospitals and health systems, seemed surprisingly clear, for a 2,309-page bill that probably very few people, if any, have read cover to cover.
If you didn't see my update earlier this week, check it out here. I think it's safe to say that many think hospitals and other healthcare providers will end up holding the bag, as it were, as they are closest to the end customer, patients, whose payers, increasingly, won't be able to foot the bill.
Coverage has been increased, but to what end? It's clear from the Massachusetts experiment with universal healthcare that hospitals have not done well because as paying patients have increased, reimbursement rates have shrunk. While the number of uninsured is smaller, to be sure, there aren't enough caregivers to treat them all, and when you add people to Medicaid rolls while simultaneously cutting Medicaid reimbursement, as has happened in that state, hospitals are worse off.
In fact, as I mentioned in my update, Boston Medical Center, which was breaking even financially before reform, is now losing $12 million a month.
When reform was implemented, Massachusetts had already much fewer uninsured than most states. So if you think reimbursements are lean now, wait until states have to pay for thousands, perhaps hundreds of thousands, of newly insured. Even with federal help to offset some of the budget hits that states will experience, revenue per unit of service will have to go down. States aren't exactly flush with tax dollars looking for a home.
So what's a strategic leader to do when faced with these long-term realities? I wish I knew.
Maybe we'll see a further rash of hospitals and health systems opting out of government-provided healthcare. I'd certainly consider it if I were operating a profit-making business—however, about 75%-80% of hospitals don't fit that portrait.
Opting out of the government payment system would eliminate about half the market of paying patients, but what good is payment if it doesn't cover your costs? We've seen physician offices doing just that already, although it's been mostly under the radar. We haven't seen many hospitals do it, but I think it's coming. There just isn't any free lunch, but Congress doesn't seem to have ever gotten that message.
Are we facing a race to the bottom among healthcare providers? Will it be survival of the fittest? It certainly looks that way. And you can be sure that as providers go bankrupt or consolidate heavily, Congress' won't take the blame, similar to the way they've been able to blame others for the failure of Fannie Mae and Freddie Mac, who were largely operating under the rules the politicians gave them.
They'll just bail out and hope nobody notices.
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It was indeed a momentous day to be in the company of thousands of senior healthcare (mostly hospital) executives at the American College of Healthcare Executives annual Congress, which kicked off the day after arguably the most sweeping healthcare legislation passage since Medicare was enacted more than 40 years ago.
Not surprisingly, given a smorgasbord of educational sessions from which to choose, there was a healthy helping of health reform talk.
Maureen Sullivan, senior vice president of strategic services for the Blue Cross and Blue Shield Association, had several predictions and observations about how the bill will change the insurance landscape in the coming years.
She listed a number of challenges:
Medicaid rolls will swell from 44 million to 55 million in five years
Tremendous implication to states in funding, especially after the stimulus money runs out. Many state medical directors are thinking of an aggressive push into Medicaid managed care to manage costs.
Individual market will climb from 17 million on the rolls to 25 million in five years.
Small group market will shrink to 28 million from 31 million, though some think this market will all but disappear
Uninsured will drop from 46 million to 28 million.
Large group market will grow from 122 million to 124 million.
More than half of the population will see the most disruption, especially in commercial market, as rates go up for younger, healthier, and drop for the older and sicker.
Benefits will be richer, leading to premium increases
Claims costs for nation will go up by 49% in individual market.
Big change will be in the "clusters" of states where there had been risk underwriting.
The insurance mandate is weak, leading many to pay the penalty rather than obtain insurance (which has happened in Massachusetts).
The new benefit richness mandate may raise rates by 14% alone.
Hospital business will be affected dramatically.
Rate shock
Sullivan made use of a map of the United States that broke down the states into five color-coded "clusters," based on the state mandates on insurance coverage that are currently in effect. In clusters 4 & 5, which look like a big backward check mark on the United States map, rates will go up between 12%-99% for the healthiest segment of the population to cover the richer benefits that will be required as well as the dramatically reduced underwriting power the bills give insurers to measure risk.
Meanwhile, rates will decline from 47% to 22% for the sickest in those states. Individual and small group coverage will be unstable. Risk spiraling will begin as healthy people drop out of the commercial market because of rate shock.
In Massachusetts, "jumpers" or people who come in and out of coverage, doubled after their healthcare reform package. She expects the same under the new national bill. At the event luncheon Monday, David Nash, MD, at the Thomas Jefferson School of Population Health listed a number of items about the latest health reform proposal:
Congress passed insurance reform of some kind, but it's not clear what kind of healthcare reform was really achieved.
There's nothing about coordination of care, cost or quality in reform. Nash is concerned for hospitals.
Nash also presented his more general thoughts about the state of healthcare:
Only 18% of what the U.S. does to patients is based on trial-based evidence. The rest is based on the "art" of medicine. The evidence shows that U.S. healthcare get it right a little more than half of the time. It's not because of lousy doctors or numbers, but bad systems, he said.
Variation leads to patient mistakes and patient harm. For example, hundreds, perhaps thousands, of people were harmed at hospitals during the three days the snoozing Northwest pilots made front-page news in the New York Times.
Hospitals are not only dangerous to patients, but also to the workforce. In fact, healthcare is more dangerous to its workforce than the construction or agricultural industries.
There's no simulation in healthcare. If the airline industry can improve outcomes based on simulation, then healthcare should too.
Nathan S. Kaufman, from Proven Strategies to Enhance Performance Under Healthcare Reform, also shared his take on the implications of healthcare reform, and says he tried not to sound like a pessimist, but was having a hard time doing so.
Kaufman said healthcare reform has a better than average chance of having made things worse. Change is needed, but the change we're going to get is based on compromise. The bill was written by people who don't understand healthcare, he said. Kaufman listed a number of thoughts about reform:
Pharma "gives up" $27 billion a year, other interest groups are also "giving up" some future revenue in the healthcare bill, but Kaufman argues that they're all going to make this up somewhere else. All of these companies are winners.
"Sometimes change can make things worse, and that's what's going to happen here. The Congressional Budget Office's estimate of Medicare Part D's cost was off by 40%. What makes you think they'll get this right?"
Rate of spending on healthcare is fiscally unsustainable because 80% of spending is on chronic care, which is lifestyle-related. Yet there's nothing on that in the bill.
There's a difference between coverage and access to care, which was learned in Massachusetts. As a result, the Massachusetts commission is cutting fee schedules and will phase in capitation.
This bill, as in Massachusetts, puts providers at risk. In Massachusetts, they paid 82% of cost on Medicaid before reform. Now they pay 70% of cost, even with the federal government shoring up the program. Boston Medical Center, a hospital that was breaking even before reform, is now losing $12 million a month.
"Those who don't respond to these lessons will go out of business unless the government bails you out, which, I predict too, by the way," he said.
The bottom line is that hospitals did not do well under this bill, he said. Kaufman's theory is that comprehensive reform is working to hasten the crisis rather than solve it. Healthcare reform is just the beginning. An estimated 30-50% of hospitals will operate at a deficit, he said.
The way things are going, hospital CEOs are turning over at a rate only seen in retail or, dare I say it, the fast food industry.
That's not quite true, but it's really not that far off the mark.
According to the American College of Healthcare Executives, hospital CEO turnover reached 18% in 2009, a rate equaled only four times since tracking began in 1981, their survey says.
There's some interesting stuff in there. They track turnover rates by state, and much of the turnover seems to be in the west. ACHE attributes much of the rate to demographics—CEOs who are part of the baby boom generation are getting old and they're ready for retirement. But I don't completely buy it.
Our survey tells a slightly different story. According to the HealthLeaders Media Industry Survey, more than 88% of hospital CEOs are satisfied or very satisfied with their job, and only just more than 5% plan to retire during the next year. So what gives?
Well, partially, it's because the two surveys use a different sample of respondents, but there aren't that many hospital CEOs out there. And still, the numbers are pretty far apart.
So is there something more at work here. After all, some hospitals and health systems have been squeezed financially over the past 18 months as they haven't been in a very long time. In the past, some hospitals with big structural problems could solve or at least hide those problems through borrowing. Access to capital was much less constrained than it is now.
You can't borrow your way to prosperity by building a gleaming new patient tower to increase volume like you once could. Besides that, building success through volume is likely in its twilight, and as patients and future patients, we can all be thankful for that. Future success will depend on quality outcomes and developing a more lifelong relationship with the patient—not by "doing more" to patients.
Back to my thesis. I suspect some of the CEO turnover noted in the ACHE survey is because the boomer CEOs are getting close to retirement, but the picture is undoubtedly more complex than that. Boards are getting wise to the metrics the hospital c-suite should have been giving them over the years, and they're not putting up with pat explanations anymore. They're diving deeper, getting more educated, and if they don't feel their leaders have a viable pathway to get them back to financial stability and keep them there, they're showing them the door.
Frankly, the turnover rate isn't that far from the average of about 14% a year, so drawing conclusions on just these two factors is certainly not scientific. I'd love to hear what you think.
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Sometimes we all need a refresher course in what it takes to be a good leader—me included.
Yes, I am an Eagle Scout (thanks largely to my parents hounding me after the coveted driver's license was secured at age 16), and served on many of the school leadership posts when I was younger.
In the more recent past, I've chaired the boards of a couple of charitable events and managed teams of writers and editors for the publications for which I've worked.
I learned a lot of lessons about effective leadership, but without practice, those lessons fade. I suspect that's the way many of you who read this column look at your own leadership skills. They don't just stay sharp on their own. They need consistent honing.
My wife and I are renovating a house here in Nashville. It will be a great house when it's finished, but in order to afford the project, we decided to jettison the huge estimate for painting the interior of the place and do it ourselves. That is, ourselves, with a more than generous dollop of helping hands from friends and family. We got the party started last weekend priming the place and worked about 10 hours Saturday and Sunday. I'm still sore. We got it done, but it wouldn't have been remotely possible without the gang of volunteers who helped us.
In my current job, I spend most of my time on my own. I don't supervise anyone but myself, and believe me, that's a tall chore. But it's different, and during the painting party this weekend, it was funny how often I stopped to remind myself that oh yeah, this is a point where a good leader would do "x" and a bad one would do "y."
In any case, through this simple project, I re-learned four important lessons on leadership we could all learn from:
1. Trust your team to achieve the goal—even if it's a stretch
When we started Saturday morning, I told everyone that our goal was to get the entire house primed, including walls, ceilings, and closets, before the end of the weekend. I could tell my general contractor was laughing up his sleeve when I told him earlier in the week about this goal, but I was determined. Similarly, I saw eyes roll when I told our volunteers that this was what I envisioned. Seeing their reaction, I asked them to just do the best they could and we would probably be surprised at the results.
2. Listen to your lieutenants
Several times during the weekend, some of the best volunteers asked me if it would be OK to do something different than what I had asked them to do. Often this meant that several people would be stuck doing the same thing all day long, but that we would be more efficient in getting the work done—in other words—achieving the goal. Fine by me, I told them. Others thought of solutions to problems I never would have thought of on my own. If I treated them like hired help, they would've resented me, and probably gone home, because I was only paying them in pizza and beer.
3. Don't be afraid to pitch in on a project
I spent a lot of time going around and checking with people on their work. That's different than checking up on them. I started by asking them if there was anything I could do for them. I was reminded of the term "servant leadership" used by so many of the hospital and health system executives I interview—particularly the religious-based ones. I think people appreciated that approach.
I wasn't hounding them to do the work quickly or to cut corners. I was offering to help by doing the crappiest jobs myself, leaving my own work to wash out the paintbrushes and rollers and haul supplies to where people were working. I recalled an instance where the publisher at a publication where I previously worked jumped in to help when the newspaper's production was delayed due to no fault of our own. He could've just gone home. He could've screamed and yelled. Instead he helped us achieve the goal.
The morale boost from that act was incalculable, and I know for a fact that when it came time for us to achieve goals that he set, we remembered.
4. Never take any player for granted
Many will tell you not to take a key player for granted. That's good advice. But it's also great advice never to take even a slower or non-key player for granted. I spent a lot of time last weekend helping people who weren't great painters find the right paint, the right tools, and directing where the action should be taking place when I had expected to be doing a lot of the work myself.
For instance, it took me three hours to paint a closet because I spent so much time being interrupted to get people started on other important jobs. I tried never to show any frustration with being interrupted. Instead, I got people going on something else, praised their competence, and returned to my closet when that task was successfully under way.
Guess what? The house was fully primed and we even had time to tackle some other jobs that I never expected we would have time to do. I offer these examples not because I am so proud of myself for my leadership abilities. And I'm not sharing them with you because I feel like I've uncovered some great revelation about successful leadership, but sometimes, we all need a refresher course.
I got mine last weekend.
Note: You can sign up to receive HealthLeaders Media Corner Office, a free weekly e-newsletter that reports on key management trends and strategies that affect healthcare CEOs and senior leaders.