Can your hospital survive as an independent hospital? 9 questions to ask

One of the most pressing questions facing hospital boards today is whether their hospital can survive as an independent organization. Over the years, Becker's Hospital Review has examined this dilemma in various formats. Here are some thoughts on the issue, in the form of eight to 10 questions, for a board to consider.

1. Does the hospital have a clear strategy for physician alignment? Hospitals previously considered themselves in fabulous shape if a large portion of their business came from physicians who didn't have a financial relationship with the hospital. That has since changed. Now about 80 percent of physicians have some type of financial relationship with their hospital –– up from about 60 percent a decade ago. Rather than viewing it as a point of pride that many physicians are independent, it is now viewed as a large risk factor. Will those physicians leave the hospital and bring patients to other facilities?

2. Does the hospital have high quality care? This can be a question for hospitals of all sizes. If the hospital is small and board members don't view it as a place they would bring themselves or their family members, there is a good chance they ought to consider looking for a merger partner. Increasingly, between patient choice and between payer and government scrutiny, it will be very hard for a hospital to survive unless it exceeds a certain level of quality.

3. Does the hospital have a great leadership team? When boards hire leaders, they have a choice between talent and experience. They also need to invest in depth, retention and talent development. We often observe that really hardwired, talented engaged leadership is more critical than experienced leadership. It's often not one experience that's going to help. Rather, it's being able to respond to various situations over time.

4. Does a hospital have a clear plan, or is it operating vaguely? A hospital can adopt clear strategies to serve as guiding rules going forward. These strategies should be clearly understood across all levels of the organization, and sustainable hospitals' employees will be able to recite this strategy clearly. For example, the hospital may plan to be the best in orthopedics, the best in OB/GYN or simply offer the broadest variety of care. It can be a range of strategies: We're going to be a leader in shared savings programs. We're going to be an innovator. We're going to be the leader in cardiovascular services. The takeaway here? The goal should be well-known and easy to remember.

5. Does the system have a clear reason for being, either geographically or due to specific strengths? I.e., would the community or someone suffer if the hospital did not exist? If the hospital is geographically remote, would payers and patients suffer if the hospital was not operating? Does the hospital have geographic or certificate of need protections? Hospitals in urban or competitive markets with dozens of hospitals, especially need a defined reason for existence. This might mean the hospital is the preferred place of care for a certain specialty, the hospital is the place of choice for the working community, or the hospital specializes in something and would be hard to replace if it were not operating.  

6. Is the hospital's technology in good shape? Here are a few core questions to consider: Does the technology work and can the hospital continue to afford to invest in technology? Does it already have a full EMR and security system? Can it afford a good technology department?

7. Is the hospital physically in good shape? Many hospitals have been forced to sell or merge because they can't update or replace an existing hospital plant. We've seen this many times over the years.

8. What is the payer mix? This factor is a wild card, as a payer mix was traditionally largely dependent on demographic traits that fall out of hospital management's control. Still, hospital leaders should not be naive about the determinant nature of a payer mix. Further, hospitals increasingly control how they market their services and who they focus on. This can impact payer mix a great deal.

9. Is the hospital large and successful enough to afford to take some risks or to sustain some stresses to its revenues? For example, many hospitals can't afford to recruit doctors and staff while simultaneously investing in new equipment or technology. A hospital has to have enough size and margin to take some chances and make some investments.

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