Jim Field, president of research and insights at The Advisory Board Company, explains why he sees large and small provider systems get stuck in neutral.
In his blog post, Mr. Field writes about the same problems he says he's observed at health systems through dozens of informal strategy sessions with executives. He believes that, with very few exceptions, these struggles persist regardless of specific market dynamics.
1. The system has a complex, and sometimes irrational, asset portfolio. Most health systems are the culmination of "disparate assets," such as acute-care hospitals, employed physicians, urgent care centers, ambulatory surgical centers, skilled nursing facilities and so on. Systems collect these entities over time for a range of reasons and under the leadership of successive CEOs.
"This being the case, there is little logic to the system's geographic footprint," writes Mr. Field. "Worse still, within the inventory of assets, there is redundancy, excessive capacity, an undesirable weighting of physician types and a tangle of vendor relationships. As things now stand, some of the assets benefit the system, while others are an iron ball around its neck."
2. There's strategic uncertainty about how to leverage those assets. Executive teams may not know how to make the most of these diverse assets, although Mr. Field did note that systems have made some progress in taking advantage of their scale through back-office functions.
Mr. Field said there is general consensus under healthcare reform that systems must work with three main imperatives: cost reduction, revenue growth and clinical transformation. "But having these objectives in sight, they have no sense of how to take what they have — a mixed bag of assets — and reconfigure it into the provider entity they know they'll need," he wrote.
3. Executives are reluctant to upset the status quo. Even when a system does have a clear strategic vision, the executive team may be reluctant to "move far enough or fast enough," said Mr. Field. Upsetting the status quo is not an easy task, as executive decision-makers will shoulder much of the fallout. And there will be fallout.
"There's no way around it: the transitional work to be done will be arduous, prolonged, and loathed by nearly everyone," wrote Mr. Field. "For starters, duplicative facilities — hospitals included — will have to be shut down or converted to a new activity. Clinical services will have to be consolidated. Hospital management will have to be streamlined, or disbanded entirely in favor of centralized control." Also, health systems will need to reach a suitable proportion of PCPs to specialists, and this may result in them selectively shedding specialists.
Mr. Field brings this back to perspective: "Radical change, after all, cannot occur without an equivalent amount of disruption to the existing order. The transition can't bring everything and everyone with it; old-world behaviors can't be preserved; and many, many people will have their interests crossed and feelings hurt."
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