Developing a Culture of Execution: A Precursor to Success Under Health Reform

Healthcare organizations have to become increasingly effective and efficient not only to thrive, but just to survive, under healthcare reform. In return for an additional 32 million insured Americans, hospitals agreed a $155 billion cut in reimbursements over 10 years, which means hospitals will have to become even more effective just to maintain current performance.

"In terms of pure dollars, a hospital with a 5 percent operating margin today will start sliding into the red by about 2014-2015 if its volume and productivity stay the same," says Quint Studer, founder of the Studer Group.

Tactics vs. culture
According to Mr. Studer, too many hospitals see these bleak projections and immediately jump to the conclusion that new tactics must be put in place. Process improvement efforts, best practice programs and more complex efforts to accept bundled payments with physicians are just a few examples of some of these tactics. However, Mr. Studer says that hospitals must first establish an organizational culture that promotes execution. "Hospitals already have knowledge of tactics to improve effectiveness and efficiency. They know how to prevent falls and reduce readmissions, but efforts fail upon execution," he says.

What will separate the winners from the losers in their ability to become maximally effective organizations and prosper in light of reform is a culture that requires continual improvement, he says.

Three elements of a "culture of execution"

Alignment. According to Mr. Studer, a culture of execution requires alignment, consistency and accountability. Successful alignment means that all levels of hospital staff share the same goals and understanding of the healthcare marketplace. Mr. Studer says many hospital CEOs see the external environment differently than frontline supervisors because leadership is constantly looking to the future while frontline supervisors are more often focused on the immediate needs of their departments. "There is less of a sense of urgency the farther down you go in the organizational chart," he says. It is understandable due to the role each plays.  

A recent survey by Studer Group asked C-suite executives and frontline supervisors at several health systems the following question: "If leaders in your organization continue to perform exactly as they do today, will your results over the next five years be much worse, somewhat worse, better, the same or much better?" The survey found that the majority of senior leaders felt that their organization would be much worse if nothing changed, while 63 percent of frontline supervisors thought that the organization would be perform about the same or better.

In order to help all employees understand the need for improved efficiency, hospital leaders should use every opportunity available to them to share this message with employees. Mr. Studer recommends holding quarterly employee meetings and spending some time addressing this issue at each meeting as well as providing information about changes on the horizon in every employee newsletter.

Consistency. Hospitals also need to have consistent leadership that promotes the implementation of best practices across the organization. All leaders need to support efforts to improve the organization, because inconsistent support by leaders will undermine efforts. "One of the biggest parts of healthcare reform is taking best practices and putting them into place. It's not that we don't know how to prevent hospital acquired-pneumonia, falls or infection, it's that we can't execute it," says Mr. Studer.

What do hospitals need to do then to execute successfully? Mr. Studer says it goes back to alignment. "Even if hospital leaders consistently support an effort, getting employee buy-in for these changes often means you have to connect to the why," he says. "Make them understand the need for the change."

Accountability. Finally, a culture of execution requires all staff to be accountable in meeting performance goals. Accountability means holding leaders and employees responsible for job performance. Research by the Studer Group suggests that healthcare organizations often overstate the employee's level of performance, part of which may be due to outdated performance evaluation tools. "We're trying to build world-class healthcare using a prehistoric evaluation tool," says Mr. Studer. "If I can underperform and still get a good evaluation, then the hospital is reinforcing underperformance."

Evaluation tools should be based on objective, measurable goals. For example, a hospital CEO might be evaluated against the hospital's ability to meet a desired patient satisfaction rating. Mr. Studer also recommends that they allow certain areas to be weighted higher than others, as to better emphasize core hospital or department goals.

After an organization gets an appropriate evaluation tool in place, it has to follow through on dealing with subpar performers. "If leaders and employees aren't performing to expectations, you're never going to make the kind of improvements required by reform," says Mr. Studer.

Quint Studer is a recognized leader and change agent in the healthcare industry and has more than 25 years of healthcare experience. Learn more about Studer Group.

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