How a strong and sustainable decision-making infrastructure can improve margins

Today's health systems are operating in a rapidly transforming industry filled with new competitors, incentives, penalties and regulations, and are challenged with fulfilling a mission to improve health in their communities.

This content is sponsored by Premier.

On one hand, these changes have led healthcare organizations to pursue clinical integration efforts, as well as investments in new business models, partners and revenue lines. For example, according to a survey by Premier, nearly half of health system leaders said they had completed a merger or acquisition in the past two years, and 77 percent said they expect to do so in the next two years. But, on the other hand, these changes are occurring during a time of greater workforce shortages, payment cuts and uncompensated care.

Major financial pressures are forcing healthcare organizations to create well-paced, multiyear strategies for cost savings and new revenue streams, which can lead to long-term profitability. One of the most important keys to achieving margin improvement goals is to have a strong and sustainable decision-making infrastructure that is data-driven, coordinated, disciplined and aligned with an organization's strategic direction.

The unique challenges of health system infrastructure
Developing and implementing a transformation plan is the responsibility of senior leadership at virtually any organization. In healthcare, however, a range of leaders must be at the table to ensure the right priorities are set, and that change initiatives have strong stakeholder buy-in before implementation.

For example, while a CFO may develop a financial plan that reflects the total cost of specific clinical interventions; the CMO understands the timeline and capabilities needed to execute on these clinical changes; and the COO can help coordinate resources to drive necessary change. At the frontline leadership level, decision-making bodies across the continuum that are involved in day-to-day operations need to be engaged to manage change and execute organizational goals. Moreover, every health system has a board that assists in developing the organization's strategy and monitors action plans to ensure goals are being achieved. Needless to say, it is important for all leaders across the enterprise to have expertise, insights and capabilities that enable them to align with any long-term transformation strategy.

"There are various factors that are affecting health system performance today," said Bianca A. Briola, MPH, vice president of enterprise value optimization solutions at Premier. "Leaders must understand how changing care delivery models, federal payment penalties and market conditions will impact their organization in the long term. These unique insights require business intelligence capabilities that can measure and predict performance across the board to help leaders understand their market position and prioritize the most impactful areas to focus on over the next five to seven years."

Particularly, academic health systems, which are already challenged with treating the sickest patients, often have a departmental infrastructure that is not aligned with the team-based approach that is needed for new care delivery models. These organizations have historically been focused on providing care from a limited geographic footprint and population base. In line with the industry's move to creating high-value networks of providers, academic health systems are actively aligning with other healthcare organizations, such as physician groups, community caregivers and specialists. As they grow their footprint across a more diverse population, they need business intelligence and change management strategies that better align all stakeholders and partners to common goals with key performance indicators.

However, healthcare organizations are operating in a data rich but information poor environment. Data and integrated analytics are essential to an organization's decision-making infrastructure and needed to enable action. Unfortunately, in many cases these insights are limited to their respective functional areas, and are not integrated to drive the information that is necessary to support a broader strategic initiative.

Premier's Vice President of Strategic Accounts Chris Ash said, "Some organizations are siloed in the way they are managing data, which can create pockets where there is no true opportunity for integration and alignment with the overall strategy. Others have invested in a data warehouse and are attempting to integrate data without a clear plan for how they want to leverage the information they gather. Big data is the buzz of the past. It is small data that needs to be developed in alignment with an organization's priorities to be meaningful."

Ms. Briola continued, "The reality is that a strong and sustainable decision-making infrastructure requires all parties to have a clear understanding of the actions that need to take place to enable cost savings, revenue generation and, ultimately, long-term profitability. Various stakeholders need to be informed but they are challenged with overwhelming amounts of data and shifting market developments across the industry."

The essential components of a successful infrastructure
An infrastructure that supports operational alignment to an organization's strategic direction requires three essential components.

1. Health system boards must be engaged in the strategy. A typical board holds strategic planning committee meetings with a C-suite leader who provides input on the direction and guides the discussion. The majority of the time spent during these meetings should be around strategy, not updates and report outs.

2. A range of senior leaders, including clinicians, need to contribute to the development of a data-driven organizational strategy. Organizational strategy discussions require leaders across the continuum to weigh in and provide insights around the system's mission and vision, performance, industry trends, organizational resources and market positioning in order to prioritize the most impactful operational transformation efforts.

3. Mature day-to-day operational oversight groups, such as value analysis and workforce management committees that understand how to leverage data to make informed decisions, must be developed to align and support the work. These groups should oversee efforts to improve performance, serve as change management experts to guide progress, hold leaders accountable to executing on approved changes, support communication and use reporting to guide action planning.

Ms. Briola said, "Effective leaders have high expectations for every stakeholder involved, with a focus on sustainability and success across their organization. They are making critical decisions on long-term margin management and performance improvement strategies. The risks are real if organizations do not implement change and execute on their strategy in a deliberate way." Ms. Briola leads transformation work at Premier – her team partners with healthcare organizations and helps them assess, design and implement strategies to improve their margins, without compromising their commitments to their missions. This requires a top-down approach, with foundational priorities determined at the highest levels and clear plans that are aligned with and communicated across interdependent work streams.

Boards, for instance, must be engaged to ensure strategy discussions are taking place at the beginning of every meeting. Boards should consistently evaluate new projects, ventures and initiatives against the mission and vision of their organizations to ensure consistency with the strategic direction.

"Effective leadership requires clearly defined expectations and measurable performance criteria," said Guy Masters, MPA, principal performance partner at Premier. "As we know, the board, for example, sets a culture of accountability to the degree that it holds the C-suite accountable to specific performance standards. This culture should be consistently applied and nurtured across an organization. Accountability practices around mutually agreed upon expectations will help eliminate silos and incent collaboration across entities, departments and individuals at all levels."

Leaders also need to ensure staff have the right information and tools to be successful. For example, an accomplished bedside nurse who is promoted to department manager will require support to understand and be successful at managing productivity, staffing, scheduling and budgeting. An established infrastructure can serve as a mechanism to ensure emerging leaders are able to manage day-to-day operations as they also learn how best to make progress on longer-term organizational priorities.

Additionally, these leaders play a critical role in informing which analytics and change management capabilities are needed to support them and the work an organization is undergoing to improve. Mr. Ash said, "Once an organization has its action plan with all the interventions that are needed to operationalize change, it has to be hardwired into the workflow using technology to create sustainability. If staff do not have some kind of hardwiring mechanism, they can often slip back into the old way of doing things."

Tailoring analytics to an organization's needs is essential for leaders, oversight entities and frontline staff to drive timely, evidenced-based care decisions while delivering on cost savings and revenue generating opportunities.

The path to profitability
Ultimately, healthcare's turbulent environment requires strategic plans to be developed and aligned across an organization. The key is to ensure a healthcare organization has a decision-making infrastructure that is empowered with the right people at the table, business intelligence and support solutions to minimize operational risks and enable financial success in the future.

More articles on healthcare strategy:
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Premier ranks as No. 1 'Best in KLAS' healthcare management consulting firm
3 questions with Lloyd Dean and Kevin Lofton, CEOs of the new CommonSpirit Health

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