From the President


Richard L. Clarke, DHA, FHFMA

Did you ever wonder what living in a country with a multiparty, highly polarized political system would be like? Now you know.

The United States has moved from a two-party system with ideological wings to a multiple-party system with multiple strong political organizations, ranging from the far left to the far right. Our standard labels of Republican and Democrat don't apply in this environment. Extreme ideologies make consensus difficult because each faction is convinced its ideology is right and should dictate policy. Governments of Italy, Spain, and Greece have similarly fragmented political systems, and similar decision paralysis. And the economic stagnation and decay of these countries reflect this paralysis.

So is this our fate? Will we become a third-rate country because our national leaders, both left and right, are unable to get past ideological differences and work together for the common good? I hope not.

What is the answer? Generally, the Bowles-Simpson National Commission on Fiscal Responsibility and Reform was a good start. It provided a road map of painful decisions that could have helped the U.S. government resolve some of the structural problems. The key was that it sought pragmatic solutions taking into account various positions. President Obama made a serious mistake by not embracing the commission's findings and taking them to the American people. The far left would have argued for half measures such as preserving entitlements and taxing the wealthy, and the far right would have argued for cutting government to the bone, while not budging on taxes.

But Americans are generally practical, and I believe they would have accepted a balanced approach, even if it meant changes to entitlements and more taxes. And that would have made the future manageable because it would have been predictable.

But we aren't in that situation, and probably won't be until after the 2012 election. By then, things will have continued to slide.

For healthcare finance leaders, the next decade will be fraught with challenges. Government payment for health services and/or coverage and benefits will fall due to significant structural budget problems. Employers will continue to resist cost shifting to them, and they will continue to shift costs to employees. And taxing entities will seek new revenue streams that don't violate "no new tax" pledges, perhaps challenging tax exemption of not-for-profits as a way to raise revenues without overtly increasing taxes. In this environment, reworking strategies to remove waste and duplication within the delivery system will be "job one" for provider organizations. Payment rates will fall rapidly, with cuts deeper than traditional cost containment strategies can accommodate.

Finance leaders must clearly communicate these challenges. We must "sound the alarm" that significant payment reductions are likely to occur much faster than originally thought and identify the impact of these changes in unambiguous financial terms.

This decade will likely produce some of the greatest challenges we've ever seen. But as finance leaders, we will succeed if we anticipate the changes, adjust operations to the "new normal," and effectively communicate to key stakeholders the actions needed and their ramifications.

Publication Date: Thursday, September 01, 2011

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