Strategic Planning

How healthcare leaders can look beyond election years and business cycles to what really matters

December 17, 2019 9:36 pm
  • Uncertain times are not conducive to decisive action, but waiting is tantamount to falling behind.
  • Impending disruptions to the legacy healthcare business model don’t allow for the luxury of maintaining the status quo.
  • As the new year begins, healthcare leaders should prepare to take on risk by improving costing capabilities and approaching analytics with a healthy curiosity.

The year 2020 is shaping up to be a time of uncertainty, as election years often are. Media hype about a looming recession is compounding the uncertainty. But these political and economic concerns may be overblown, at least as they pertain to healthcare.

Instead of getting carried away by hype and headlines, healthcare leaders should use these approaches in the year ahead.

Do a reality check

The reality is that legislative activity typically slows during election years, and few political scenarios support any seismic legislative changes in healthcare in 2020. As for the likelihood of recession, signals are mixed. There are plenty of naysayers out there. But as economist Paul Samuelson famously quipped back in 1966, “Wall Street correctly predicted nine of the last five recessions.”

Any economist will tell you that increasing levels of fear about a recession can help bring it on. Yes, recession is bound to happen eventually, and we are experiencing a historically long recovery/growth cycle. It will end someday, and “someday” could be any day. Nonetheless, giving in to recession anxiety can be a self-fulfilling prophecy.

Consider the opportunity cost of inaction

We’ve all heard the adage, “Hope is not a strategy.” Well, neither is “wait and see.” For those in leadership positions, the hesitation brought on by political and economic uncertainties can start well before a recession and linger long afterward.

After the last recession, HFMA research with hospital finance leaders, conducted in 2009-10, showed that capital spending cuts persisted after the recession ended, delaying progress. As it turned out, two years after the recession, operating margins had returned to where they were before the recession started. In today’s environment, traditional healthcare stakeholders can’t afford to get stuck in a holding pattern. Too many pressing issues need addressing.

Focus on areas of real concern

Set the political rhetoric and media hype aside for a moment. The deficit is still skyrocketing, healthcare is squeezing out other necessary spending, venture capital is making huge investments in healthcare start-ups, major tech companies are flexing their capability muscles — and consumers are not happy. That all adds up to enormous change in the long term.

Vultures in the form of outside entrants are circling, ready to pounce on the healthcare services that have positive margins. Regulatory and political entities also are hovering, looking for opportunities to cut payment rates. No matter which challenge — fighting off competitors or fighting below-cost reimbursement rates — takes on greater urgency, the legacy healthcare business model will get rocked. We need to come to terms with that and realize that maintaining the status quo or making incremental improvements is not enough.

This is no time to wait and see what happens with events that are beyond your control. This is the time to move forward with true value-based initiatives. So, what should healthcare leaders focus on? 

Prepare to take on risk

Sharing risk among different parties is in our future, no matter what. The specifics are still evolving, but the overall direction is toward shared accountability for patient outcomes. Even if that seems like it’s in the distant future in your market, the need for better coordination of care among multiple organizations is universal in our nation’s fragmented healthcare industry.

Better care coordination not only benefits patients now, it also helps healthcare organizations prepare to share risk in the future.  

Get a handle on costs by improving costing capabilities

The continued prevalence of ratio of cost to charges (RCC), a traditional cost accounting method, has contributed significantly to the difficulty in accurately estimating the costs of patient care. RCC is the equivalent of using a blunt-force object when precision is required.

Healthcare needs costing capabilities that are on a par with those in the manufacturing sector. HFMA’s L7 Cost Accounting Adoption Model creates a roadmap for the actions required to ensure that a provider organization’s cost accounting approach meets its strategic needs.

Bring curiosity to investments in analytics

Data is only dry if decision makers treat it as such. Being curious about what has happened historically means saying, ‘I wonder why X is happening,’ not just tracking and reporting data.

Data-driven decision making starts with costing data and brings in data from other sources to make it more predictive. Putting analytics and costing together results in a much richer data set for decision making. Curiosity is a powerful thing.

This is no time to hesitate

The 24-hour news cycle, with its relentless onslaught of discouraging news, may make us want to hunker down and wait for better times. But improving the value we deliver to patients and other care purchasers can’t wait. Waiting puts traditional stakeholders further behind the disrupters.

And waiting has a cumulative effect. With each individual organization that holds on to the status quo, industry-wide progress slows a little more. We must find the courage in leadership to keep moving forward.


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