A Hospital CEO’s Worry- Regulation As Much As Revenue

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Welcome to Healthcare PittStop. Today I have with me a friend, Dan Jones, the former CEO of Phoenix Baptist Hospital. I’m hoping to gain some perspectives from Dan on the many challenges facing hospital CEOs and how they’re viewing the future. Dan, welcome.

Thank you, Alan. It’s a pleasure to be with you this afternoon.

Dan, could you tell folks what you think the top 3 or 4 issues are for most hospital CEOs as they get up every morning?

There is some dynamic aspect to that question depending on where the hospital is situated, the size, complexity, market, nature of the hospital—for profit, non-profit, academics, etc. In a general sense, the issues facing hospital CEOs and executive teams across the country can be bucketed into key areas. Clearly there are specific aspects in each of these buckets, but generally, regulation is one of the biggest issues in healthcare, nationally and statewide. I would rank regulation at the top. Secondly—and this is what we’re moving through right now—is the concept of value, whether it be value-based purchasing, value for the premium dollar, etc. All the stakeholders are struggling to achieve value within healthcare, and that derives a host of other tangential initiatives. Partnerships from various different stakeholders is one of the other big challenges to come across the industry, whether it’s potential consolidation with competitor hospitals, partnerships with physician groups, vendor relationships, and how those partnerships ultimately derive value. At the bottom though, it’s operational efficiency and capital deployment. How as a business can you be more efficient with revenue you receive? That’s the underlying foundation. But the thing that I think is the most exciting—and it comes as a double-edged sword—is technology. There are so many tangential paths that that issue can take, but what I’m really excited about is where we’re seeing technology [go]: machine learning, the concept of deep learning, and what it may mean for the access to care and ultimately the speed and accuracy of diagnosis. That’s more futuristic planning, but the future will be here tomorrow, right?

I want to go back to a couple of things you said to get some additional clarity. I feel sorry for hospital CEOs because they have one foot in the future, which is value, and one foot in operational efficiencies, which is based on volume. How do you deal with that as a hospital CEO today, where your reimbursement is really tied to volumes but you know you’ve got to keep people out of the hospital for value moving forward?

That is really the heart of what we’re dealing with today. It’s imperative for the executive team—in particular the CEO—to look into the future and bring concepts back to the here and now with the rest of the executive team and the stakeholders in the hospital. There’s the old Gretsky adage, “I’m skating to where the puck is going to be.” That’s invariably what the hospital CEO is doing, planning on where that puck is going to be and what we need to be doing today, next year, and the year after in order to be there. But it is a challenge when you look at where reimbursement is today for service basis and where we’re going with regulation, and the speed with which that regulation is coming down the pike, from physician reimbursement to CMS and their value-based purchasing aspects. But the reality is the only way to do that is through partnerships, getting your physicians at the table, the payers at the table, and frankly the individuals that are funding those premiums, whether it’s the employers or the government, to help insure that you have some runway to develop efficient and effective models. But it’s absolutely a challenge. In the end it’s the right thing to do, and if you keep your eye on doing the right thing, you will end up being successful.

Do you believe in the next 3 to 5 years there will be gradual changes from volume to value or will it be gradual followed by abrupt?

I would expect more rapid change. It’s all going to be dependent on where CMS goes and what the lobbyists— the AHA, the American Federation, the AMA—have to say, and Congress on MACRA and some of the other changes. The speed with which CMS is putting out some of these initiatives and changes in payment models is akin to drinking from a fire hose. They’re trying to move very quickly, but frankly I think from that speed you will see some material movement, and I think it’ll be geographic. I think you’ll see different models in different parts of the country.

You mentioned technology and how you’re excited about that. In addition to my clinical work, I support a number of companies. You know, as a company you always think you have the best thing since sliced bread. How would it help you as a CEO when a vendor comes to you with a solution that will help you move forward to get to value? How would that vendor make it easy for you to partner with them?

That’s an excellent question Alan, and the challenge there comes back to this: there’s no shortage of great ideas. It’s the execution and implementation of those ideas which is the key. In my experience those vendors that get a second call up are those that that really do two things. First, keep it simple in their value proposition. Don’t overpromise. Don’t create complexity for complexity’s sake. Keep the solution simple. Moreover, that solution has to come with little distraction to our operation. Vendors I’ve worked with in the past [are those that] bring value in their solution. They don’t disrupt your operation in trying to solve your problem. They don’t take you and your team away from what is core to your business to help them implement it. They bring the solution. They get to know who you are. They truly understand what your challenge is, and they look at you as a partner, not a transaction or an invoice to be served. So if vendors can keep it simple, they can actually leverage or bring lift to the organization, not distraction, and I think there’s a value proposition to be had in that. What I find with most vendors when they come to deliver is it’s a quick lip service; it’s a superficial understanding; the execution is a distraction to the organization. That in essence will lead to a one-and-done type of relationship.

I want to change gears a little bit. The consumer has a lot of trouble today trying to figure out where to get care. I’ve done some digging and I know that hospital surveys can be quite misleading. For instance the distance between the highest rated and the lowest rated hospital, based on these surveys, can be a very small number, only 4 to 5 percent. Do you have any advice for the consumer who is trying to figure out value and determine where to get services, how they navigate this to get the kind of care they need?

You’re spot on. The challenge is the sensitivity in the statistic. Everybody’s chasing that same gold-post objective. The sensitivity between the measurements makes the scoring very misleading. But I think it’s a great thing. It’s absolutely imperative that we create transparency; that we identify ways to bring what is a very complex industry to a level of simplicity and understanding. Moreover, I think it involves the larger industry in totality. How do we—the physicians involved, the actual hospitals, the payers—[move beyond] just ranking a specific domain with a series of scoring? The more we can do to educate the population on the complexities of healthcare the better off we are. The simplicity of the quality of care—the value that they’re getting—is important. I think what you’re going to see is over time, the proliferation and access to what I’ve termed ”Care Everywhere” is going to be something that is prolific in your communities, and that’s going to be augmented by technology, necessity, individual communities, demand in consumerism. It is a challenge and I think it’s something that we all wrestle with. But it is something that, as we pursue and race towards it—and I would challenge the industry to race toward it instead of pull away from it—the more effective we will be in actually getting to a grading scale that brings value to the industry and ultimately the consumer.

You know, as you point out, there’s a big rush to get care everywhere. This direct-to-consumer, 24-7 access line—you look more like a bank than a hospital. But the adoption for that has been woefully low to date across the country. People are trying to use telemedicine to give that access. Any thoughts on why that adoption has been so low and how that might change moving forward?

I think the biggest challenge is regulation and the sensitivity that institutions, hospitals, and companies have regarding running afoul of the federal government or state laws. What I ultimately would share is that the solution—that disruption, that inflection point—is really going to come from outside the industry [such as] when you find creative businesses or industries. Take the technology companies: when Google decides it’s in the business of providing healthcare to its employee base and it uses its infrastructure to drive the care for that group of folks, you will see a rapid adoption across different venues. I don’t want to get too far afield, but ultimately I think many of the solutions in the healthcare industry will be driven by external industries and their desire.

I share that idea of disruptive industries coming to healthcare. Dan, I want to thank you for the time today.

Alan, I truly appreciate the opportunity. It’s been a pleasure talking to you about the future of healthcare and our challenges. I look forward to the opportunity to do it again.