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What you should care about in healthcare today, from the editors of Becker's Hospital Review

How a well-connected CEO can hurt an organization

A CEO with an extensive social network may leave an organization — and its shareholders — worse for the experience.

That's because CEOs with the thickest Rolodexes, 500-plus LinkedIn connections and the closest ties to board members and other executives might be pull off an acquisition that will ultimately benefit them, but work against shareholder value.

A new study, co-authored by Rwan El-Khatib, PhD, from Zayed University in Dubai, Kathy Fogel, PhD, from Suffolk University in Boston, and Tomas Jandik, PhD, from University of Arkansas in Fayetteville, examines the "network centrality" or overall level of connectivity of CEOs and how this influences M&A activity. Dr. Jandik and his colleagues measured the connectedness of nearly 400,000 corporate officers and directors in the United States by analyzing their biographies and making note of their careers, education and social relationships.

Did CEOs attend college together or serve on the same board simultaneously? Did they cross paths earlier in their careers at another company? All of this information resulted in a family tree of sorts for each executive, identifying who knows who and how connected each person is to the larger social network of C-level executives.   

Researchers measured connectivity in four distinct dimensions. One is the sheer size of the basic network. This is similar to counting Facebook friends, as an example. The second is closeness: If you put yourself against everyone else, how many steps on average does it take for you to reach everybody in the network? (This resembles the parlor game Six Degrees of Kevin Bacon.) Next is betweenness, or how many times you're the connection between any two individuals, which is a measure of social importance. Finally, there is eigenvector centrality, or the value-rated number of connections you have. This places greater weight on people who are already influential. For instance, if you have 10 friends and one of them is Bill Gates, you are better connected than if you had 100 unimportant friends.

The researchers measured CEOs' network centrality year over year, placing them in percentiles. The following examples illustrated the breadth of connectedness they saw: One executive who fell in the 100th percentile had 792 direct connections. He could reach each individual in the network in an average of 3.2 steps. Another CEO fell on the opposite side of the spectrum, with only 10 direct connections and an average of 5.5 steps away from everyone in the network.

This all sounds like a very organized and data-driven popularity contest so far, doesn't it? What does this have to do with mergers and acquisitions?

Quite a bit, as it turns out.

After placing executives in percentiles, researchers examined their connectedness in the context of M&A activity among S&P 1500 companies from January 2000 to December 2009. They found highly connected CEOs pulled off transactions more frequently than CEOs with less network centrality.

Deals driven by well-connected CEOs also generated mostly negative stock returns for the bidder's shareholders, and often reduced the combined value of merged companies. Increasing CEO centrality from the 25th to the 75th percentile of the sample deepened bidder shareholder losses by an additional 3.4 percentage points on average, according to the study.



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Could Republicans dismantle the PPACA as we know it?

Nearly half of Americans think the Patient Protection and Affordable Care Act is a bad idea. While more than 50 percent of Americans supported the law in January, as of September, that number had dropped to the high thirties. And, the midterm elections are mere weeks away. Could Republicans get what they've been asking for where it concerns the PPACA?



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Our perfectly designed healthcare delivery system

In the United States, we have a perfectly designed $2.7 trillion healthcare delivery system. It's perfectly designed to deliver more and more healthcare, but not well-designed to "deliver" more health. And when you start asking the question, "How do you deliver more health, not just more healthcare services?” the answers are very different. As the proliferation of shared risk, accountable care and capitated payment arrangements has made clear, this will be an important area of focus for hospital executives in the coming decade.

In New York, Montefiore Medical Center can tell you — almost to the penny — how much an investment it takes to set up a school-based health center. They model how many pediatric asthma admissions will be prevented, how many days of school attendance can be saved, and how many teenage pregnancies will be averted. Ultimately, this data translates into more money for the school district with better attendance, better educational outcomes for children and in a capitated environment, savings from reduced ambulatory sensitive admissions to Montefiore. Most importantly, an "upstream" investment keeps kids healthier in the first place, with ancillary benefit to the community.

In California, Dr. Preston Maring at Kaiser Permanente noticed that there were vast differences among patients being readmitted for congestive heart failure, with low readmission rates in Richmond, and high rates in Oakland. He observed that many patients he sent home to Richmond were going home with families, while those living in Oakland were going home alone. Digging deeper, patients home alone were eating frozen meals, and these high sodium, low nutritional meals were leading to readmission. Based on these geospatial analysis results, Kaiser Permanente was able to contract with a private vendor to deliver high-quality, fresh meals at low cost to these members. Problem solved!

While I'm not suggesting that every hospital needs to start school based clinics or engage in geospatial analysis, understanding your patients' needs — sometimes better than they know themselves — will allow the "mass customization" that differentiates the highest performers in an era of retail healthcare. Whether you call it managing population health, addressing the social determinants, or the worst name — the "social non-medical needs" of patients, these skills and strategies are essential today.



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16 critical competencies for healthcare leaders

The healthcare industry faces momentous change ahead, and leaders of healthcare organizations must be ready to adapt, facing these changes head-on. Good leaders, who may have succeeded at leading their organizations during the somewhat steady years of fee-for-service reimbursement, may not be good enough to take on the challenges of preparing their organizations for such significant disruption. Instead, the industry needs exceptional leaders, say Carson Dye and Andrew Garman, authors of "Exceptional Leadership: 16 Critical Competencies for Healthcare Executives."

The second edition of the book, out this year, includes updated information around the 16 competencies in the Dye-Garman model for exceptional leadership. The 16 competencies, grouped into four cornerstones, provide an overview of the type of leadership skills and traits healthcare leaders must cultivate, as well as those boards should look for when selecting new leadership for their organizations. Below is a quick overview of each competency; for a more detailed analysis of each, along with case studies, click here.



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If you don't want pricing transparency, start reading now

14 organizations pushing for more transparent hospital pricing

Last week, Massachusetts became the first state to require health insurers to post real-time pricing for healthcare services, by provider, online.

The move didn't get much press (perhaps because the state has put in place a series of regulations to make pricing more transparent over the last few years), but is significant. It provides consumers with a way to compare provider pricing for a certain test or procedures under their specific health plan.

As consumers take on more responsibility for the cost of their care, one can expect more state action around healthcare price transparency. However, state lawmakers aren't the only ones pushing for price transparency. Leading the charge for price transparency are a number of nonprofit and for-profit entities, each with their own motivations to push for more information on healthcare pricing and quality.

The George Washington University Master of Public Health Program recently released a list of 14 organizations taking the lead in healthcare price and quality transparency efforts. Here are the organizations identified by the program; healthcare leaders who are ready for transparency may find it wise to partner with such groups. Leaders of organizations that lack competitive pricing, or where pricing is not tied to value, should be very worried about the work these groups are doing.

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7 CEOs behaving boldly

It takes a pretty radical office memo to make headlines, but it happens.

Stories about boldness in the C-suite are hard to resist. These seven CEOs work across a range of industries but have at least one thing in common: They've surprised their organizations and the public, be it with a candid memo, involvement in changing hold music, unique meeting style or unconventional approach to crisis management.

1. The CEO who never wants her company to forget its ugly mistake. It wasn't until February 2014 when GM issued a recall for the Chevrolet Cobalt, years after company insiders knew enough about the car's faulty ignition problem. Two months into her role as CEO at the time, Mary Barra immediately found herself in a hot seat. As bad as the problem was — and still is — she helped bring it to light and dealt with it in a way that strayed from the insulated company's norm.

She did not form a committee over the problem, start a program or launch a 10-step plan. Rather, at a town hall meeting, Ms. Barra told employees, "I never want to put this behind us. I want to put this painful experience permanently in our collective memories," according to Fortune. This statement startled some, as it was starkly different from anything a past GM CEO has said. She fired 15 employees in the wake of the game-changing internal investigation report, and she's moved at least seven high-level executives out of the company in her first eight months as CEO. She has also gone on to encourage more debate in executive meetings, less talk about "culture" (a term she hates) and more focus on actionable daily behaviors.

2. The CEO who wants people to become "raving fans" of a government website. This isn't just any government website, but HealthCare.gov — the recipient of endless (yet warranted) criticism just one year ago. HealthCare.gov CEO Kevin Counihan wants to change that, vowing the website will offer a "highly satisfying" user experience during the 2015 enrollment period, which begins Nov. 1. This includes a shorter and simpler registration process and the ability to "window shop" for plans a week before enrollment opens. It's an ambitious goal for any federal website, but particularly the most notorious and mocked one of all time.

3. The CEO who made a list of the miles he's flown this year (300,000) and the important moments he's missed with his family (his son's emergency surgery, for instance). In a blog post that received much attention this summer, Max Schireson, CEO of fast-growing database vendor MongoDB, announced his plans to step away from his role with the New York company to spend more time with his family in California. His resignation post — titled "Why I am leaving the best job I ever had" — was ultimately an optimistic one, but he also made note of a gender gap in that male CEOs are rarely asked about their work-life work balance. "I recognize that by writing this I may be disqualifying myself from some future CEO role. Will that cost me tens of millions of dollars someday? Maybe. Life is about choices," he wrote. "Right now, I choose to spend more time with my family and am confident that I can continue to have a meaningful and rewarding work life while doing so."



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5 trends in medtech investing from AdvaMed

Dispatches from AdvaMed2014

AdvaMed2014, the Advanced Medical Technology Association's annual conference, is taking place this week in Chicago. The event brings together thousands interested in medical technology's latest developments.

During a session yesterday, four active medtech investors discussed current trends in medtech investing and how recent consolidations among major device makers will impact investor backing and merger and acquisition activity moving forward.

1. M&A activity within medtech is high, but deal volume is lower than in the past. Bill Baker, a partner with KPMG, noted that activity has finally returned to pre-recession levels, with companies with the best market positions securing higher multiples than have been seen in recent years.

Peter Spring, a principal at Bain Capital Private Equity, agreed. "Companies that have an existing leadership position are even more valuable than they once were," he explained. Additionally, as regulatory approval processes become increasingly arduous, companies experienced with FDA approval are very attractive. "The competition for new products is so much more, to have the expertise around the regulatory system…is hugely valuable," he said.

Anne E. Sissel, a partner with Baxter's investment arm Baxter Ventures, said that while it's true we're seeing deals in the 4x revenue range, which is generally at or above pre-recession levels, the total volume of deals is down. Year to date deal volume is about three-quarters of where it was last year, she noted.

2. Acquisitions are increasingly driven by the bottom line. "Today what we're seeing is more investments moving more and more to the bottom line," said Ms. Sissel, pointing to Medtronic's $43 billion acquisition of Covidien, which Medtronic has said will result in $250 million in savings from increased efficiencies. "Today's bottom line is the bottom line, and I think we're going to see that going forward."

3. Investors must analyze deals in light of reimbursement changes. As healthcare providers deal with reimbursement pressures, and increasingly take on risk for the cost of care, medtech companies that provide the highest value in their category will be at a great advantage.

"There's also a lot of pressure on utilization of healthcare services," which results in providers pressuring medtech companies to charge less, said Nicholas Alexos, managing director at Madison Dearborn Partners. Companies that can offer competitive pricing and equal quality will be rewarded with higher sales volume.

4. Smaller companies offer the best upside investment opportunities. Bain's Mr. Spring said his firm is currently focusing its investments on smaller medtech companies. "There are certainly advantages of the largest companies, but what we're finding is that for the highest-value assets, the valuation is so high, it's hard to make an investment right now," he said. Instead smaller companies present "more opportunities for us as investors," he said.


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10 thoughts on how we're dealing with Ebola

How well are we dealing with Ebola in the U.S.? The answer depends on who you ask.

Some public officials are making a deliberate effort to reduce panic over the Ebola epidemic. Some media outlets, such as the Wall Street Journal, have argued a sense of concern is more than reasonable, given the U.S. government's track record as of late. Others are discussing mistakes made, and still others are proposing solutions as we move forward.

The following thoughts and opinions are about Ebola, but also tie into a broader discussion about the ways we have and should deal with crises at national and global levels.

Here are 10 quotes from media outlets, public health officials, politicians, physicians, CEOs and others about Ebola in the United States and worldwide.

"The concern right now is that the stress of this and the fear of this could be more damaging to this community than the virus itself."
David Lakey, MD, commissioner of the Texas Department of State Health Services

"Ebola is stoppable and there's little reason to think that the world's leading disease experts at the CDC aren't ready to combat its spread — except these days government competence is all too often exposed as a fragile veneer. When an elite corps like the Secret Service can't remember to lock the White House's front door and alleged health technocrats can't build a working ObamaCare website for less than $2 billion, a sense of low-level worry about Ebola seems more than reasonable."
— Editorial in the Wall Street Journal

"Over the past several days we have learned a lot about the unique challenges of situations like this.  There were mistakes made. There will probably be mistakes made in the future as we go forward. … I stand by the fact that the process is working. We don't have an outbreak."
Texas Gov. Rick Perry

"I know that the American people are concerned about the possibility of an Ebola outbreak, and Ebola is a very serious disease.  And the ability of people who are infected who could carry that across borders is something that we have to take extremely seriously. At the same time, it is important for Americans to know the facts, and that is that because of the measures that we’ve put in place, as well as our world-class health system and the nature of the Ebola virus itself — which is difficult to transmit — the chances of an Ebola outbreak in the United States is [sic] extremely low."
— President Barack Obama during a press conference Monday

"I'm a married man with a little girl. I'm wearing the same shirt I was when I was in the car with that family. I was in their house next to those materials, meeting with them, listening to them, and assuring them last night and again of course today. If there were any risk, I would not expose myself or my family to that risk."
— Dallas County Judge Clay Jenkins wore suit pants and a dress shirt — no gloves, mask or body suit — last Friday when visiting the apartment of individuals deemed "high-risk" after coming into contact with Thomas Eric Duncan. The judge's attire was one instance of a Dallas official taking a "notable visual approach" to reinforce the point that Dallas is safe, according to the Washington Post

"In retrospect, we could have responded faster. Some of the criticism is appropriate. … While some of the criticism we accept, I think we also have to get things in perspective that this outbreak has a dynamic that's unlike everything we've ever seen before and, I think, has caught everyone unawares."
Richard Brennan, director of the World Health Organization's Department of Emergency Risk Management and Humanitarian Response



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Henry Ford succession planning: It's all about who you know

Nancy Schlichting met her successor last year on a conference panel; she tapped a Ritz-Carlton exec — whom she met through her frequent visits to the hotel — to run the system's most important hospital opening during her tenure. What executive selections like this mean for traditional succession planning.

It's about who you know. We've heard the phrase hundreds, if not thousands, of times, and if you're like most, it probably rings true when it comes to your career. Most job opportunities come to us thanks to a 'heads up' from an old colleague, mentor or professional acquaintance. And, securing a role is much easier when you can draw on a few relationships for a connection into the hiring organization.

The phrase has especially rung true for leadership at Henry Ford Health System, whose CEO, Nancy Schlichting (set to retire at the end of 2016), has eschewed traditional executive search firms and processes, handpicking her successor, Alameda Health CEO Wright Lassiter.

How did she meet him?

They participated in the same panel at last year's U.S News & World Report's "Hospital of Tomorrow" forum, held in Washington, D.C., according to a Crain's Detroit Business report.

This isn't the first time Ms. Schlichting has recruited a next-generation Henry Ford executive. When the system opened its Henry Ford West Bloomfield (Mich.) Hospital in 2009, she recruited a Ritz-Carlton hotel general manager, Gerard van Grinsven, to lead the new facility.

The leadership choice was a curious one, given van Grinsven had no healthcare experience. Ms. Schlichting apparently saw that as a good thing: West Bloomfield was Henry Ford's first expansion into the affluent Detroit suburbs and was designed with a hotel-like atmosphere in mind.

The hospital has been wildly successful in regard to this aim. When I interviewed him back in 2009 on his appointment and the hospital's opening, van Grinsven said the hospital (hospital!) had already received nine wedding inquiries since its opening.

When asked by Becker's about the move several years later in 2012, Ms. Schlichting said, "I hired [Gerard van Grinsven] from the Ritz-Carlton luxury hospital chain to run the building of West Bloomfield. He saw things in the [hospital's development] that healthcare leaders may not have seen."

Schlichting wasn't the only one with confidence in van Grinsven. This summer, he was named CEO of Cancer Treatment Centers of America.

With the cost of using executive search firms reaching the hundreds of thousands of dollars, it seems a cost-conscious decision for executives to tap their own system's presidents or their own successors. This is especially true (and perhaps only successful) when the exiting CEO has proven highly effective and is well respected within the organization, as Ms. Schlichting is. Ms. Schlichting has led HFHS as president and CEO since 2003, and the length of that tenure would seem to add weight to her recommendation for a replacement.

However, before boards rush to give their current CEOs the power to pick the next chief executive, they may want to read an article, published in August, by Becker's Akanksha Jayanthi: "CEO succession planning: How to use incumbents to help, not hurt, an executive search."

As Ms. Jananthi writes in her piece, "Although CEOs can't handpick their successors, they can take certain steps to ensure their preferred candidate's CV sits at the top of the pile."

I imagine that's exactly what happened at Henry Ford. Wright Lassiter wasn't the only CV, but his newly formed relationship with Ms. Schlichting certainly gave the committee a reason to give him a closer look.

I just wish I knew what he said on the panel that won her over.



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Does cutting back charity care put hospitals tax exemption at risk?

In the first of what we hope will be many podcasts exploring the reporting behind Becker's Hospital Review cover stories, Financial Reporter Ayla Ellison sits down with Editor in Chief Lindsey Dunn to discuss charity care cutbacks by hospitals across the country, why the cuts are occurring even in states that opted not to expand Medicaid, and if the hospitals worry the reduced charity care could impact scrutiny over tax exempt status.

Read the cover story, "Is this the end of hospital charity care?"

Download the mp3 file of the podcast, or listen below.



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