As the November/December cover story of Healthcare Innovation noted, “Everyone participating in the U.S. healthcare delivery and payment system understands that the COVID-19 pandemic has had a dramatically destabilizing impact on all sectors of the industry. With ICUs filling up across the country and infection rates from the virus exploding beginning early in the year, the leaders of the nation’s hospitals, medical groups, and health systems had to shift quickly to telehealth-based care delivery to the extent possible, while dealing with a shutdown of elective procedures mandated by the Centers for Medicare and Medicaid Services (CMS) that ran from mid-March to mid-May, and cratered the elective-procedure revenues on which patient care organizations depend for survival. But even as patient care organizations in some communities had begun to go back to semi-normal operations, others began to experience dramatic and incredibly difficult surges in COVID-related inpatient admissions.”
Even so, the cover story noted, “[B]eyond the immediate crisis that leaders of the U.S. healthcare delivery system are still facing around the pandemic, industry leaders are reflecting on longer-term issues, as the system shifts further towards value-based payment and away from fee-for-service payment—at a time of great financial and operational instability. The pandemic, those interviewed for this article agree, made it clear just how fragile the patient care organization financial outlook really is, for so very many.”
Among those interviewed for the cover story were Andy Smith, president, and Pete Smith, managing partner, of the Naperville, Illinois-based Impact Advisors consulting firm. Earlier this fall, they spoke with Healthcare Innovation Editor-in-Chief Mark Hagland about the broad leadership and management issues facing senior leaders in U.S. patient care organizations right now. Below are excerpts from that interview.
Looking at the need for hospitals, medical groups and integrated health systems to financially stabilize and to move forward successfully into the value-based care delivery and payment world, what will leadership mean, in the context of moving their organizations forward? The healthcare industry has a long history of custodial management, but that mindset will no longer help patient care organizations to thrive.
Andy Smith: I agree with you; custodial management isn’t going to work. The COVID-19 pandemic has been a catalyst. It’s as though we hit the fast-forward button on the evolution of the healthcare system. And the healthcare system has been staid and conservative, almost by design. But the current situation is calling for a new type of leadership, almost entrepreneurial. And leaders are going to have to partner, are going to have to acquire, be acquired, or be left behind. And overall, we’re going to have to start treating healthcare more like a business, almost like a retail business, because that’s where the threats are coming in from. And it’s been fashionable to bring people in from other industries; but healthcare is unique and rather parochial. So we’ll need a blend of outside and inside thinking, and new expertise.
Pete Smith: What a unique time this is, for leaders over the last eight months. Andy’s been thinking about the long-term health and perpetuation of your organization. But think about what the healthcare system had to do to mobilize in this crisis: everybody had to pivot to deal with a very immediate problem, mobilizing command centers, mobilizing shifts in delivery. It’s amazing what everyone did, really. Leadership really has had to do two things in the past five months—react to a crisis, but also respond to long-term viability issues. Leaders have had to have two strategies, one for near-term and one for longer-term.
Andy Smith: And the emerging system is going to require a different level of leadership; and for the most part, the industry has stepped up. They’ve shifted to telemedicine, they’ve sped up their decision-making. And I spoke recently with an executive who’s saying in his organization, if we haven’t done something in the past six months, why should we go back? We need to keep the pace going.” And, with disruptive new entrants coming in, technology and processes enabling more and more care delivery outside the inpatient hospital and even into the home, and other changes.
Do you believe that the historic inpatient-centrism of healthcare management and strategy is beginning to go away now?
Pete Smith: I think that what you’re going to see is hospital leaders who get that, and who will pivot their organizations based on new models. So you’ll see some winners. You’ll also see additional entrants in healthcare, the Walmarts and Targets, that will eat away at the profitable primary care services; and hospitals that don’t get it will be left with a very high-acute-care business, with very sick patients in inpatient hospitals and a lack of profitable primary care businesses. You’ll see that accelerating, through COVID. We think there will be a lot of mergers and acquisitions.
Andy Smith: Our healthcare delivery system is a product of its environment. And in terms of how they started to change the industry around telemedicine—once the reimbursement changed, everyone pivoted. And we are going to have more care at home, more integrated care, and we need the reimbursement system to reward that change. Yes, I do think that will happen. We obviously pivoted very quickly to telehealth; but the statistics are showing we’re starting to pivot back. Like all things, it’ll end up somewhere in the middle.
Do you believe that the senior officials at CMS [the Centers for Medicare and Medicaid Services] will reverse the relaxations around telehealth that they created this spring?
Pete Smith: I think the new policies will require more discipline. And we’re in the technology and process end of the business, and our clients are using so many different technologies, and that’s unsustainable and not safe. I would suspect they’ll be requiring a higher level of HIPAA compliance and safety, and less fragmentation. But there will be some level of virtual care that will be paid for by CMS and others. But if it tightens up, it will be around forcing greater discipline and integration.
Andy Smith: What I hope is that they keep reimbursement levels high and keep some of the relaxation. Our clients did this very quickly, but in a very informal, almost undisciplined way, but now they’re circling back to make it more integrated and programmatic, so increased reimbursement will help in paying for some of those reimbursements. There’s a sense among some that they might be overpaying, but if we can get this to be incorporated into how we deliver healthcare, we can make health care more efficient; at least, that’s what I hope happens.
Do you believe that acquisitions will accelerate and eat up unprofitable organizations?
Andy Smith: COVID is accelerating an existing trend, around [the demise of] inefficient providers. Are there ways around that? Yes, but it will be difficult. And if you’re not a progressive innovator, it will be very difficult. That trend
What should CIOs, CMIOs, etc., be doing right now, in all of this?
Pete Smith: I can tell you what our clients come to us and ask. There’s this recognition that they’ve spent a lot of money and time putting in foundational systems, like EHR [electronic health record] and ERP [enterprise resource planning] systems. What they’re struggling with is how they save money; a lot of that involves reducing variability in systems and reducing the overall number of information systems. They want to make their application portfolio less varied and lower-cost. That’s very basic, but it also ends up being very strategic. The second thing that people ask about is how they can create a digital strategy for their patients, their clinicians, and everyone. It’s creating that visibility in their communities and their catchment areas; it could be with all those stakeholder groups. So the concept of creating a digital strategy is very hot right now, and that encompasses things like migration to the cloud.
Andy Smith: And a lot of our clients are asking us how they build an organization to support that. So we’re doing a lot of organizational planning with clients to help them build out teams. And IT strategy needs to be a reflection of overall digital strategy. And it comes down to knowing your strategy and community. I did a 5K with my family this weekend, and they asked us whether we wanted to sign up for a heart scan for $49, and I’m sure there was a CRM [customer relationship management system] behind that.
Pete Smith: I would emphasize Andy’s point on the organizational structure and the new way to deliver IT. COVID taught us that you don’t have to be present in the same location. And do organizations really need 1,000 people in a building anymore? Can they outsource their business? So there’s a lot of talk about that—maybe I can do a hybrid model of remote, cloud-based solutions, and maybe even some outsourced staff. So there’s a lot of thinking going on around that.