LEDI 88 | Health System Leaders

 

Every health system leader has unprecedented executive management challenges facing their organization in the wake of the pandemic. This time, we’re offering a special edition of Leader Dialogue, as the ones who normally asked the questions now get the chance to talk! Today’s episode will be a roundtable discussion with hosts Ben Sawyer, Dr. Chuck Peck, and Roger Spelman about health system leaders and current market challenges. Full of rich engagements, gold nuggets, and educated sources, join us in discovering the perspective of the experienced hosts about the industry!

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A Roundtable Discussion On The Health System, Executive Management, Pandemic Challenges, And More!

We are brought to you by the Baldrige Foundation and its strategic partner, ABOUT Healthcare. Speaking of ABOUT Health, we have Ben Sawyer, as always, my good friend and colleague who is an Executive with ABOUT Health. A little bit of a surprise to some of you maybe but it is to us. We are going to try something different. We have Dr. Chuck Peck, also our good friend and colleague.

You probably figured out our pattern if you read regularly. Dr. Peck and I are co-hosts of the show. We trade off on this, as you’ve probably figured out. We decided that we would like to do this together occasionally. We are going to try it out. Please let us know what you think. The three of us are going to discuss some topics that we have been talking about amongst ourselves.

As we prepare the show, we source guests for you to help you with your current issues and challenges, and we thought, “Let’s the three of us talk about some of these things together and recap what we’ve talked about.” I’ve always wanted to do something with Chuck at the same time but because of time constraints, we’ve split it up. We are going to try this and see how this works. Dr. Peck, welcome to this special edition of the show.

Thanks, Roger. It’s great to see you and Ben.

It’s great to see both of you, guys. I’m looking forward to this conversation.

Me too. I would like to start by talking about what happened before the pandemic. We usually talk about what’s going on since but what were we talking about before? Chuck, let’s think back to the summer and fall of 2019. At that time, you were working with a major healthcare consulting firm, Guidehouse. Your dance card was full at the time with healthcare leaders who had some major challenges. What were some of the hot topics in the minds of the healthcare leaders that you were talking to at that time?

Thanks, Roger. I went back and looked at some of the meetings that I had and what people were talking about. I narrowed it down to a few big topics that kept coming up back in 2019. Back then, hospitals of large physician organizations, etc. were concerned about the whole price transparency issue. There were a lot of discussions in Congress and elsewhere about when they were going to finalize the price transparency rules, how that was going to impact hospital systems, etc. That was the big thing on the dance card, then.

There was also a lot of discussion about patients’ demands for more Telehealth and convenience in general. How do we make our systems more patient-friendly? How do we meet consumers where they want to be met when they have a healthcare need? Another big topic was some of the new business models that were emerging at that time. Walmart, CVS, and Walgreens are anticipating going full bore into the healthcare space.

I have a few statistics I’ve looked at about how that was a rocket ship during the whole COVID epidemic. The final two things were the increasing merger and acquisition activity that was continuing systems getting together with systems. It was increasing at a pretty healthy pace. Finally, there was a lot of discussion about health disparities.

That’s a great list. I wonder what happened to those issues. Did they go away? When you think about Telehealth, as you said, it shot up like a rocket. I remember in my own experience that it was difficult to get healthcare physicians and healthcare leaders excited about Telehealth. They said, “Patients and physicians don’t want it.” COVID comes, shuts things down, and they say, “How fast can you get this going?” There was tremendous demand for keeping the doors open and staying in contact with patients. What was driving mergers and acquisitions versus what’s going on now?

There’s no question that Telehealth did shoot up like a rocket. If you look at some of the numbers, Walgreens, CVS, Walmart, Oak Street, and a number of what I call nontraditional providers are bigger threats now than anybody imagined. A couple of statistics that are pretty impressive. If you look at retail health clinics, CVS has over 1,100-minute clinics for low acuity care now and 100 health hubs for chronic disease management.

Walgreens is opening about 100 Walgreen health centers for testing and nurse consultations by the end of December 2022. Walmart care clinics continue to expand and provide more limited healthcare services within the supercenters. Since everybody is focused a lot now on Medicare Advantage, Aetna covers almost three million Medicare Advantage beneficiaries, and 11% of the market has now become part of CVS Health.

Walgreens has co-branded its Medicare Advantage Plans with UnitedHealth Group as the preferred network pharmacy. Walmart has a ten-year partnership with UnitedHealth as well, targeting Medicare Advantage lives, and they are starting in Georgia and Florida. Traditional health systems and folks reading this need to look at this and understand exactly what their strategy needs to be.

If I were to sum everything up, what happened during COVID is that our readers were forced, frankly. I don’t think they had a choice. They were forced to stop innovating for a few years, while others accelerated innovation during the time that all of our folks were taking care of patients during the epidemic. I know you and Ben have some comments about this. Our traditional health systems need to think about what their strategy needs to be and how they are going to move forward with all of this primary care activity being taken from them by non-traditional providers.

LEDI 88 | Health System Leaders
Health System Leaders: Our traditional health systems need to think about their strategy and how they will move forward with all of this primary care activity being taken from them by non-traditional providers.

 

Ben, maybe you can weigh in. Do you think it’s too late if health systems don’t get into the more innovative spaces? Chuck is right that they were talking about the tyranny of the urgent. They did not have the bandwidth to innovate. In fact, some have abandoned innovation for cost reasons because it’s probably a big number on their balance sheet, and they can walk away because they want to keep beds filled and surgeries occurring, and that sort of thing. Is it too late? Has the market moved on from health systems?

It has moved fast. There has been a real commoditization, as Chuck alludes to, in this competition for low-acuity services. To add to the statistics, as he pointed out, large retailers are entering the healthcare economy by offering these low-acuity services that can be delivered at scale, as Chuck described. It enables them to compete against traditional providers based on price and convenience.

For traditional providers, the cost structure is much higher, as you alluded to. It’s because we have such complicated procedures that we have a much higher expense base in terms of facilities and providers, and so forth. Also, compared to the peak of the pandemic in Q1 of 2020 through Q1 of 2021, Telehealth volumes are now down 95.8% in markets on average more than 35% nationally. While it peaked, everybody was into it but it didn’t end up becoming the revenue source and/or consistent mode of operation that health systems could depend on to shore up the revenues.

Also, interestingly enough, in both 2020 and 2021, 35% increase in antidepressant and antianxiety drug prescriptions associated with Telehealth visits, so it looked like behavioral health, which has always been a problem, has an access problem. The challenge is if you are competing against a low-cost provider like Walmart, CVS or Walgreens that doesn’t have those infrastructure costs, and you are dealing with commodity-based low acuity services, it’s very hard to compete with that. The market change very quickly.

Health systems’ primary core is the ability to provide acute services like nobody else can like procedural-based services that require complex care. Generally, the strategy in markets where you see rapid cycle commoditization is that you stick and protect the core, and then you innovate to augment the core where it makes sense for your consumer market.

The health system's real primary core is the ability to provide acute services as nobody else can. Click To Tweet

There are clearly great opportunities for health systems to become much more consumer-advocated, which is an important thing that they need to be able to create. For example, making it easy for patients to get in and making sure that they have great network integrity with their clinically integrated network and physician providers, so patients can get into their providers quickly and from the providers back to the hospitals. All that consumer-based activity is what I’m talking about in terms of innovating around your core but when you are trying to go out and do a direct competition on low acuity services, it’s not probably a great strategy.

Ben and Chuck, have the core changed? We used to think of it as peripheral business or picking up extra business, but now it’s become much more of a higher percentage of their business. When you talk about the core, has the core changed? Has that train left the station, and we are not going to get on, so let’s move on to what you were talking about? What is it that only the hospital can provide? When I work with leaders, they said, “Only do what you can do. Don’t do the things that you have to figure out.” Is that true for our health systems too?

Here’s the thing that I worry about the most when I look at all these numbers, and as Ben did, I would direct our readers to the most recent flash report from Kaufman Hall. The margin loss numbers are staggering. I hate to be simple-minded but if you dig deeper, it looks like the rich got richer and the poor got poorer. What do I mean by that and what am I most concerned about having been a practicing physician for the first several years of my career? The bottom line is that systems are in a race to the bottom, and that’s a bad place to be.

It’s all about cost-cutting because their revenue is deteriorating. Why is their revenue deteriorating? Everybody wants to blame the payers, and there’s certainly enough blame to go around but there’s something a little bit more insidious that’s also going on, which is that systems are losing their revenue faster because patients are going somewhere else.

What kept them attached to people like me when I was in practice, to systems or doctors now, is relationships. Those relationships have deteriorated either because of more convenient access in some of the competitors or because other patients are now looking even more closely at cost and convenience. A lack of affordability, which many people are talking about now, pushes them even farther away from traditional systems now. It’s pushing more and more mega-mergers.

We see people say Atrium and Advocate or CVS and Aetna merging under the guise that it’s going to cut costs. The fact is the data doesn’t show that it does cut cost but what it does is it makes affordability in most cases even worse. There’s got to be a huge investment and focus on how to improve relationships with your patients, how to improve access, and how to make it more convenient for patients to see you.

If you are not going to be able to do that on the primary care side, then think about how you are going to partner in your community with these people who are garnering all these primary care patients so that when they need specialized high-level care, they are going to be sent to you or come to you as opposed to your competitor. This goes along with what you and Ben have been talking about in terms of trying to capture as much market share as possible for the high-acuity services in your marketplace.

That brings up an interesting question in my mind. I wonder if the insurance companies are taking advantage of their CRM if they are managing their customers far better than the health systems are. The reason I say that is that I am being contacted by my insurer much more often than I am by my health system in terms of steering me, asking me, and doing surveys. Are you guys experiencing that or have you seen that too?

I have seen that. It’s because they are on top of all the claims data and tracking it relative to utilization. The world of the insurer is more focused and simpler in many ways than the provider. The insurer is offering an insured product for which they are collecting premiums to make sure that they can cover all of that. Therefore, they have to stay right on top of that, which includes communication with the subscribers as it relates to how they are utilizing it.

LEDI 88 | Health System Leaders
Health System Leaders: The world of the insurer is much more focused and simpler in many ways than the provider.

 

We have been talking about the relationship. Has the relationship shifted from the health system and the provider to the insurance company?

I personally think that’s not the case, you are getting more information from them but this is the opportunity ground. Let’s back up and go into what Chuck was saying. If a health system, by the health system, I mean its hospitals and provider networks, refocuses on its core and establishes strong personal relationships of the hospital to the providers and the providers to the patients and so forth, which also includes creating great access.

The healthcare academy out of DC sent out a document that 57% of consumers would be more likely to recommend their provider if they had a good digital experience. That’s starting to get the attention of the health system communities because what they are recognizing is personal and is also electronic. In other words, it’s using the web and eliminating barriers for patients to get into the doctor, into the hospitals, etc. Now, we don’t have that. You call, get a phone tree, asks you if this is an emergency, hang up, and then it asks you if you have COVID, go get testing because we don’t want to see you for 7 to 10 days.

In other words, that’s part of our phone tree, and then we are surprised when patients go to the ED and they wait in the ED because we directed them there. We didn’t give them any other easy way to go. That’s what I’m talking about. We have to become very consumer savvy at our core. In our clinically integrated network with our providers, we need to establish strong high trusting relationships with them.

We are all in the same boat together. We are trying to figure out essentially how to serve our communities in the catchment areas that we serve. We need to make it super easy for consumers to be able to come in. That is the best way to preserve market share and positioning against these nontraditional savvy competitors who are much better at direct-to-consumer marketing and positioning, and they do it at a lower cost. That’s the battleground.

I would like to put yourself in the place of the leader. You are going into your senior team meeting, what’s on your agenda? Now we know what we didn’t know before, and we can’t go back in time. We can only go forward. What should be at the top of your agenda as the leader of a health system? What are you going to measure and start focusing on?

As a former leader of a health system not that many years ago, what you have to be focused on are a few very important things. Forget about the strategic list that has 50 things on it. You shouldn’t be focused on more than probably 3 to 4 things. What are those 3 to 4 things? To me, number one is that it always still has to be quality and safety. Let’s be honest about it. It’s also got to be about your employee engagement, and that includes physician engagement as well as staff engagement, particularly nursing engagement. We all know what’s happened with that and is still happening with that from the pandemic and now through the current space.

You also have to be focused on fiscal responsibility but also fiscal stability. How are you going to balance your revenue with continuing to try to lower your cost? I’m not saying this is the last thing on the list but it needs to be on the list. The fourth thing would probably be the patient experience. To me, those are the four biggest things. I’m not including digital or front-door strategies as a separate item because to get to some of the things that we talked about. You’ve got to encircle all those things with the right technological and digital front-door strategy.

That’s all patient experience.

To me, those are the key things. Somehow strengthening your physician relationships has to be a key part of relationship building as well. I say that because who has the most number of doctors under their fold? It’s Optum, the UnitedHealth Group. I can imagine what information those physicians receive on a daily, weekly, and monthly basis. I can imagine what the access requirements are for patients that we finished talking about if you are a physician working in the Optum network.

I can imagine how strong the focus is on employees, physicians, and patients. All the things we have been talking about, CVS, Walgreens, Walmart, Amazon, and all of those retail-focused places, this is their bread and butter. They know how to do this. That’s why what Ben and you have been talking about is so critical in making sure that you understand that when you are also talking about your core.

A note for the three of us, maybe we ought to see if we can do some interviewing of some Optum physicians. We might have to disguise their voice or something but see if we can get them to talk about before and after. What was life like for them previously, and what is it like now in this new system? What information and encouragement are they getting? What’s their level of engagement and satisfaction?

I was keeping track, Chuck, of what you said in terms of the key metrics. I could not agree more. I totally agree that those are the essentials. The quality and safety, provider satisfaction, patient satisfaction, and then fiscal stability make good sense. What’s interesting to me is I look at that it goes back to sticking to your knitting or supporting your core. A lot of those are related to your efficiency.

For example, fiscal stability has a lot to do with making sure that patients are getting in and getting out in the time that you are authorized for, based on their presenting condition at DRGs. If not, you are building up a pile of avoidable days, which drop right to your bottom line as an example. If you have elongated challenges of getting patients out into alternative care settings in the post-acute side, then they park in the hospital and use a bed. That’s critical.

If you are not able to give ED physicians other alternatives outside of sending them home or putting them on the hospital service, your ability to drive quality, safety, satisfaction, fiscal stability, and so forth is compromised. To me, that’s looking at your core systems, both basic input, throughput, output, your rev cycle processes that are accompanying that, and looking at those key performance indicators that you talked about, quality, safety provider and patient satisfaction, fiscal stability, and what those measures are. Look at the input and process metrics that are influencing those and stay on top of it.

A lot of health systems have put in lean daily management, for example, where they are empowering the front line with day huddles, and then they have escalation huddles so that you can surface issues quickly and have them solved by noon. Those things are going to be essential in this new era of medicine, where you have these very savvy competitors that are trying to erode your catchment area. You have to manage the shop well to be able to drive the KPIs that you are looking for.

I would finish with this last thought. We all know Morten Hansen. He wrote the last book in the series, Great at Work, and talked to all of us about, “Do less and then obsess.” That’s what we are talking about. Figure out what your priorities are and then obsess about that. Protect your core. Do what’s necessary to make sure you can be successful. That is the recipe for winning in this market.

Figure out what your priorities are and then obsess about that. Protect your core. Do what's necessary to make sure you can be successful. That is the recipe for winning in this market. Click To Tweet

That’s great encouragement and admonition, Ben. As we are struggling to boil things down, it’s still a lot. What a perfect time for exception reporting. There are certain things that are table stakes. If you don’t have quality and safety, physician and employee engagement, and financial stability, you don’t get to play. You’ve eliminated yourself from this competition.

With that in mind, what are we going to obsess about? That’s what I would like to encourage our leaders to think about. Don’t abandon all those things. They are absolutely necessary. As a leader of your team, and most of our readers are leaders, whatever team you are responsible for, what are you going to obsess about and lead and encourage them with strong character-based visionary leadership?

You guys are well-read in the field. I’m going to ask each of you to recommend to our leaders what would you draw them to. We’ve talked about the Kaufman Hall flash report. They are not a sponsor, and we are not promoting but there are certain people and organizations who do a great job of doing the research, so we don’t have to. What would each of you send our readers as something to take a look at to help them in this area of obsessing and leading their team with vision and character?

I’m going to go back to the book that I’ve always gone back to. It’s not a healthcare book. Kauffman Hall and those organizations are good for numbers but it’s about putting the data into action. The book that I still think is as relevant as it was then is Good to Great by Jim Collins. I’ve encouraged every one of the leaders that have worked with me to read that book. I’ve given that book out. It’s such an important book to understand what being a level five leader is.

The question I would pose to everybody to ask first is to make sure that you understand who your competition is. Up until recently, health systems thought of their competition is the physician group, if you are a physician down the street or the other hospital in town, etc. Is that who your competition is? Who is your competition? The strategies that you are going to develop and utilize are going to be designed around whoever that competition is. You have to get that right first because if you execute the wrong strategy, you are going nowhere. You have to understand who is your competition so that you can design the correct strategy for that.

That’s a great recommendation. I would give two others. There is an interesting workbook. It’s written by a process engineer named Pascal Dennis. It’s called Getting the Right Things Done. It is a story of a COO that comes into an organization, and he’s confronted with lots of distractions and people not being able to execute the vision. He practically goes into every area and helps them understand what’s driving the business in your department, in your area, and he pulls it together. It’s a lot about strategy execution and the fundamentals of that. That’s an excellent book.

The other one that I often go back to is The Five Dysfunctions of a Team by Patrick Lencioni. What we do in our organization is convert what he talks about into a flywheel. To describe that briefly to the readers, essentially, there are five components of the flywheel. The first is honest, robust dialogue and knowledge exchange. What we recommend culturally is that you teach your people that whenever they are confronting a challenge, they have honest, robust dialogue and knowledge exchange to understand what it is. It’s to achieve alignment.

Teach your people that whenever they're confronting a challenge, they have honest, robust dialogue and knowledge exchange to understand what it is. It's to achieve alignment, essentially. Click To Tweet

The next step is commitment. It’s not agreement and consensus because people have already given their voice but it’s a commitment to those few things that you are going to do and focus on to make happen. Commitment leads to accountability. Accountability is those things that you are going to do, and I’m going to do, and the timeline. It then leads to the fourth item, which is results. You are tracking your KPIs and your input and process measures. When you do those four things well, it builds internal trust and drives customer loyalty, and the flywheel continues.

Number 1) Honest, robust dialogue and knowledge exchange. Number 2) Commitment. Number 3) Accountability. Number 4) Results. Number 5) Internal trust and customer loyalty. It’s also diagnostic. If you are not getting results, it’s probably because there’s no clear accountability and commitment. You don’t have honest, robust dialogue or people don’t trust each other. I love those principles that Pat brings out in his book and then applying them in a, “This is what we do around here,” concept.

LEDI 88 | Health System Leaders
Overcoming the Five Dysfunctions of a Team

Overcoming the Five Dysfunctions of a Team: A Field Guide that goes along with that. I would recommend some great exercises for people to maybe use in your senior leadership team or a retreat setting. Those are great resources and discussions. I’m afraid we have to bring this to a close. We would love to do this more often, and we will but our readers could help us improve this by giving us some questions. Let us know what you would like us to address and what direction you would like us to take this. Ben, how do our readers get in touch with us? What’s the best way for them to submit ideas?

The best way to do that is through the Baldrige Foundation’s Leader Dialogue website. It’s www.LeaderDialogue.com, and there is a space there where you can ask for follow-up or submit a request. It goes right to Erin Sellers, who is the Senior Event Coordinator at the Baldrige Foundation. That’s Erin.Sellers@BaldrigeFoundation.org. She can get it to the right person to be able to follow up.

We will remind people of that. Thank you so much, Chuck and Ben. This has been very interesting and fun. Hopefully, it has been helpful to you, our readers, to give you some encouragement and direction in these difficult times. Please stay in touch with us. There are a lot of shows out there, so thanks much for reading this one. Our hope is that it will continue to get better and better and more helpful to you and hit the target for you and your team. Have a great day. We will see you next time. Thank you so much.

Thanks, Roger. Thanks, Chuck.

Thank you.

We had a fun conversation. It was a little different because normally, we are the ones asking the questions but this time, we got a chance to talk. What do you think about it, Chuck? That was fun, wasn’t it?

It’s great. The one advantage that we have is that we’ve worked in multiple places. I’ve had the great fortune of working in many different kinds of healthcare organizations in my career. Multiple places in the country in small and large communities and large systems. The one thing that does is it gives you some perspective. You get to talk to a lot of people, and they let you know what they are thinking.

What we did is we tried to share what it is that they are thinking and concerned about and add some of our own thoughts about where we think this whole thing is going and who the competitors are, and how health system leaders might refocus their efforts on who the current competition is. Not who the competition was a few years ago because the landscape has changed. I still don’t think we understand how dramatic the changes that are ongoing now are because of COVID and all the other things that are occurring in the healthcare environment.

Normally, we are the ones asking the questions and don’t get to talk too much but you guys, Ben and Chuck, have so much insight. You got to talk, and I always have opinions. It was a lot of fun. We had fun, and we hope that you will enjoy this too. Give it a read. Thank you so much.

 

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