Healthcare Reform Demands Innovative Thinking From Hospital Leaders

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For three years, America's hospitals and physicians have been living with the realization that "some day," the Patient Protection and Affordable Care Act will finally be implemented.  And if news reports are to be believed, some components of the law aren't going to be fully operational as scheduled. However, if you think that point is still somewhere down the road, you're right, but not for much longer. While a few portions of the Act will be delayed, broad-based implementation starts with the coming fiscal year, which begins October 1, 2013.   

Many details of this new law – which, with its nearly 3,000 pages of legislation and regulations, is complex and far-reaching will take years to sort out. However, implementation will start on schedule, and hospitals will be facing challenges unlike anything they've experienced, at least since the advent of Medicare in 1965.

Based on my professional role – helping hospitals and boards slot in the best-qualified C-level executives – I have seen the executive-level skill-sets required in coping with the host of challenges hospitals face today.  In looking at the requirements the PPACA will impose, I have identified what I think are the two most important hot buttons hospitals and their leaders must address in order to succeed in this evolving marketplace.  

Supply and demand
With the stroke of a pen, the PPACA has expanded the insured base of patients in America by millions of individuals. Some experts say that number is 30 million, some say 40, a few say even more Americans will suddenly be enfranchised by health insurance. Regardless of the number, demand for hospital-based services will immediately skyrocket.

It is true that America has long had laws which mandate that individuals with medical emergencies receive hospital care regardless of their willingness or ability to pay, and some claim that this debunks the claim that demand will soar under PPACA. However, not all hospital care is emergency care, and not all those with valid medical emergencies felt empowered to seek out care guaranteed them by law. But with the advent of PPACA, these self-imposed limitations will fall by the wayside.

Yet when the PPACA was passed, nothing was done to allocate the billions of dollars needed to fund the expansion of America’s national healthcare delivery system.  If our system of hospitals is to provide quality care for these newly-enfranchised potential patients, expansion will be required. Despite that, on a per-patient basis, hospital reimbursement is being cut.  

More dramatically, the PPACA has also imposed a sharp reduction in Medicare reimbursement to physicians. That half-a-trillion-dollar roll-back in physician reimbursement is essential in helping to fund the PPACA. However, there are clear signs that thousands of physicians are either planning to bow out of the Medicare system, or they're planning to retire early from the practice of medicine altogether. Those physicians most affected by the cuts seem to be those at the ends of their careers – the physicians with the most experience, and often, the most patients.

Yet even without this law’s emerging impact on the pool of available physicians, hospitals will be faced with a huge, suddenly insured demand for patient care services, but without a comparable increase in the available resources needed to provide that care.

Long-term, the solution may involve significant expansions of both inpatient and outpatient hospital facilities. But because of the time involved in designing, funding, gaining regulatory approval for and actually building and staffing new facilities, facilities expansion is a challenge that will take a decade or more to address.  

Short-term, the answer to meeting increased insured demand will most likely involve more hospital employees, providing more facility-based care, but utilized in a smarter fashion.  It may also involve completely new and innovative approaches to making the most from hospital facilities and technology. Should demand suddenly and dramatically outstrip the ability of facility-based care to meet that demand, hospitals may have to change how it looks at the patient-care work week.  

In the mean time, as those long- and short-term answers are evolving, hospital leaders will need to fully embrace the intricacies of supply-and-demand, as it applies to medical care, to a degree never before faced. Hospital executives who have spent their careers looking for ways of trimming back services – and their costs – will have to reverse that focus and start looking for ways of expanding services without breaking the bank.  Hospitals will need strong leadership with a clear vision of the implications of the changes being required of America’s healthcare system under the PPACA.

Over a span of decades, America's hospital system has grown up around "silos" of care — independent organizations or interest groups which handle their own narrow focus, and often did so in competition with other interest groups or organizations. Specialists and primary care physicians — and hospitals and outpatient surgery centers — competed for patients, often crossing turf lines to capture a greater share of the market, and of the reimbursement pie. At the same time, hospitals and their own nurses and other employees competed for the right to allocate resources, with employees banding together in unions and hospital executives drawing hard lines between us and them.  

However, under the changes sure to be wrought under PPACA's huge expansion of insurance-based care, those areas now dominated by competition will have to quickly evolve into areas of true collaboration.  The huge spike in demand coming from the millions of newly-insured Americans will push the overall healthcare delivery network’s capabilities to the max — and often, beyond the max.  For hospitals to remain the cornerstone of America’s healthcare delivery system, they will have to learn even newer ways of allying with physicians, employees, and currently-competing facility-based providers.  

Someone — and who better than hospitals — will have to take the lead in creating truly integrated networks of cooperative, collaborative care.  No longer will competing groups be fighting over patients. In the past, patients have represented and defined a system based around limited and usually insufficient demand-based resources. Dollars – and the competition for dollars – defined the system that has evolved over the past six decades. But instead of that competition for limited resources, providers will be struggling to stem the flood-tide of increased demand. Only through carefully-focused and truly-innovative new approaches to collaboration will hospitals be able to forge integrated service networks that will meet the needs of the suddenly-increased pool of patients.

To even consider this dramatic change in relationships — let alone to embrace it — a hospital's C-level executives will require a new mind-set.    

Understanding the need to quickly evolve a competition-based system is going to be an essential executive skill. Today's hospital-centered healthcare delivery system is built around insufficient demand, at least among paying patients. However, under the PACA, this system will have to quickly evolve into a collaborative-based system, one defined by a supply-and-demand equation that is suddenly weighted on the side of demand, rather than supply. 

In my judgment, this PPACA-driven paradigm shift will be the biggest challenge faced by hospitals in decades.  And these two hot buttons -- supply and demand and collaboration -- will be the most important focal points that hospital leaders will face.  Leading the move to those changes will require new skills and new insights at the executive level so hospitals can quickly adapt and embrace this dramatic new reality.

Marianne Blackwell is healthcare market leader for Ryan Search & Consulting, headquartered in Nashville. In her 25-year healthcare career, she has placed thousands of professionals and leaders.

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