6 thoughts on the movement from inpatient to outpatient care & 7 core thoughts on great leadership

This article discusses two issues that we find of real interest. We hope that you do as well. The first part of this article discusses national trends in the movement from inpatient to outpatient care and the impact on hospitals and health systems. The second part letter discusses seven core thoughts on great leadership.

6 thoughts on the movement from inpatient to outpatient care.

The overall shift to outpatient; big box stores; frogs boiling. Whether Obamacare or Trumpcare, we expect that there will continue to be substantial movement from the inpatient to outpatient arena.

(A) The movement to outpatient care has been gradual but significant. It has been generally at a clip of 2 to 3 percent a year. This movement from hospital inpatient to outpatient varies significantly. Some states have seen very little movement while others have seen substantial movement. This movement is expected to continue for several more years.

(B) Like in big box stores, the movement from inpatient is gradual but significant. Big box stores saw gradual movement to e-commerce that didn't immediately kill their margins and business. However, hospitals, like big box stores, have low profit margins and the gradual loss of inpatient to outpatient business ultimately has a very dramatic impact. Thus, even though gradual, at some point, it creeps up on margins and profits and can be very significant. See the article I co-authored with Molly Gamble titled "Do Hospitals and Health Systems Face the Same Fate as Big Box Stores? 3 Key Thoughts" January 18, 2017 on this issue. For a copy of the article, please email Kirsten Doell at kdoell@mcguirewoods.com.

(C) As an analogy there is the old story about a frog. If you throw a frog into a pot of boiling water it will jump out instantly. But if you place a frog in cold water and slowly raise it to a boil, the frog doesn't know it is in trouble until it is too late  With big box stores we think this was largely the case with the movement to the internet. With hospitals and health systems, the movement started with small movements and then has accelerated to cause greater trouble.

1. Stalls and Hiccups. There are some huge hiccups in the movement to outpatient. There is currently a false claims case investigation with a stand-alone ER company and a large investigation and destruction of value of Theranos, the outpatient lab company. These two areas were expected to have a negative impact on hospitals. They have not been as bad as expected.

2. SCA; Optum. In contrast to the hiccups, there was the recently announced merger of Optum, a health services company that is part of UnitedHealth Group, and Surgical Care Affiliates, an ASC company. This deal brings together in large part the largest payor in the country with one of the largest surgery center providers. I have two or three comments on this. First, SCA has brilliant leadership and we shouldn't underestimate the impact of this move. Second, the fact that Optum, which is part of UnitedHealth Group, is willing to acquire the largest surgery center chain shows how far they have come in no longer being held hostage by local hospitals and health systems. In the old days, even though payors wanted to work with outpatient providers, they were very concerned because of the response their biggest supplier (hospitals) could have on their bottom line. Now, they seem to be willing to make a move.

Other troubling considerations. Here are five thoughts on trouble ahead.

1. Hospitals are seeing lower inpatient days and lower procedures.

2. At the same time they are seeing higher labor costs and the labor costs are hard to reduce.

3. Hospitals can't reduce capacity easily.

4. The impact of the movement and other issues are again leading to layoffs.

5. Supply chain costs are often harder to manage in the outpatient setting.

Answers. In terms of answers to these challenges, here are three thoughts.

1. First, in the ideal situation a hospital can backfill in the capacity it has lost to outpatient.   

2. Second, more sites, whether as a large health system or large big box store, seems to not be the winning strategy. Expansion has the appearance for a period of time of giving the hospital lots of market reach. However, we have found with large health systems that more facilities does not equal more profit or necessarily market essentialism.  

3. Third, there is great opportunity is to be market dominant and market essential. At the same time this has to be done on a rational cost market platform. This seems to be the goal and the place for profitability for health and hospital systems. I.e., one must aim for dominance of market to be needed.

ASCs; urgent care; spine; telemedicine. Certain other examples of the movement to outpatient include:

Surgery Centers. There has been a movement of about 2,000 to 5,500 surgery centers over the last fifteen years. At the same time over the last couple years the net growth in surgery centers has been next to zero.

Urgent Care. On the urgent care side there has been a movement of 3,000 urgent care facilities to about 10,000 sites in a few years. This has been dramatic.

Spine. On the spine side there has been a movement of about 45,000 procedures that are done outpatient to about 300,000 done in the outpatient setting per year.

Telemedicine. Finally, telemedicine has also grown tremendously. This has been rumored to be almost approximately 50 percent of all Oakland, Calif.-based Kaiser Permanente's visits. The fascinating thing about Kaiser and the movement to the efficiency of telemedicine is that because Kaiser is also a major payer, they are responsible for total costs of the care they provide. Subsequently, they need to find ways to deliver care that is cheaper and more efficient. Thus, the great adoption of telemedicine.


When we think about leadership, we think of seven things.

1. A leader must be passionate, engaged and excited. It doesn't mean that he or she needs to be rah-rah or that he or she has to micromanage.

2. A leader's greatest importance is often building teams and setting direction. A great leader is known by the fact that he or she has developed the next level of leadership. There is nothing worse than a leader who has left the cupboard bare in terms of the next level of leadership.

3. A great leader must set clear goals and clear directions for a company.

4. We believe that great managers don't micromanage. They have a very clear idea of what is going on and they have a clear sense and a finger on the pulse and they know what is going on but they don't micromanage. They often use what is called loose tight management. In essence they are very loose with terrific people where they need to be but tight in making sure things actually get done.

5. We find and we are a believer in this concept taken from an old Adrian Gostick book “leaders praise often.”  They use the concept that no one is invisible. This means that when somebody does something well they are recognized for it in some way.

6. Great leaders are not afraid to make hard personnel decisions. This doesn't mean that they quickly fire people, but they are very cautious in allowing bad people to fester in their organization.

7. A great leader is emotionally mature. Most people know each day which leader is "showing up". I.e., leaders' moods and behavior is consistent and predictable. A great leader possesses high emotional intelligence and is able to temper these things well.

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