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When Capital Markets Talk, Smart Leaders Pay Attention

Michael Sachs, Sg2 Chairman, on what the capital markets are saying to and about health care:
"The (capital) markets are responding to a myriad of issues facing health care organizations—declines in utilization, the full impact of health reform and general acceptance that the cost of health care is sapping America of needed resources to fund job growth. The capital markets are saying that the industry’s current pace of response to these issues is inadequate, and this will bring about massive change in health care.

"I just met with a very impressive group of health care CEOs who explained their strategies for transforming their organizations for the new era. But I came away from the meeting feeling as though I had heard the same words 15 years ago during the managed care era. There were major discussions about the need to invest in information systems, to the tune of $200 million in some cases. The CEOs showed lots of organizational charts describing physician integration models and presentations about pilot projects for managing at-risk populations. But there was no discussion about how they needed to fundamentally restructure their organizations to deliver care at 40% to 50% lower cost than they are operating at today. One CEO made an impassioned plea for population health management, only for some of us to realize that he had just reinvested in his old business platform rather than moving to a more sustainable, value-driven model. In my remarks I asked, “What if someone in your market started a price war?” I am not sure that some even looked up from their BlackBerrys. I am sure that others in the room just assumed that either it would not occur, or they would respond in kind."
Read the entire article at the link above.  If there's an underlying theme here on Health Care Strategist, it's that some health care leaders need a refined perception of what's coming at them and the necessary magnitude of change required to survive.

Now please understand, dear reader, I'm not talking about YOU.  If you weren't interested in new viewpoints, you wouldn't be here in the first place.  No, this rant is for those other leaders, the ones you and I love complaining about.   They know who they are and I'll leave it at that.

The leaders who've dithered far too long on issues like value, quality and satisfaction.  Those opining that "Quality isn't differentiating.  Customers don't understand quality and don't buy quality."  The leaders who worked hard on making that a self-fulfilling prophecy.

Leaders who, as latecomers to the "IT as strategic imperative" party, demanded too little of their IT vendors and paid too much.  Then they got serious about ACOs only when Medicare sweetened the reimbursement pot, never mind the strategic and intuitive logic.

They're the leaders who...the Feds couldn't trust to deliver "meaningful use" in their EMR adoption and so needed to be bribed with money upfront AND penalties later.  I hate to say it, but a bribe to focus on customer value is insulting, not incentivizing.

The leaders scant attention to the massive amounts of venture capital devoted to the notion that many hospital admissions are process defects elsewhere in the system.

Leaders who...if the VCs are correct, don't seem capable of estimating their revenue-at-risk or the likelihood of it becoming some geeky startup's new value stream.

Leaders who...ignore the obvious opportunities in those new value streams.

Leaders who...insist on asking "Why..?" instead of "What if..? Why not..?"   (That's me on Twitter by the way - @whatifwhynot - please follow me as I will you.)

Caution...delay...risk as usual.   "Let's take it to committee.  Let's form a task force"  Hard to call it 'leadership,' isn't it?  

No, it's "business as usual" in health care - chasing Medicare dollars and responding to everything else in just-in-time fashion, counting that everyone else will too.  As business models go, it's worked for too many organizations and for far too long, more's the pity. If Sachs and I are correct (and I'm pretty sure we are) there's a day of reckoning in the not so very-distant future.

"Yes, we're spending $100 million because WE love 50 year-old business models and our patients told us THEY love private beds."  Of course they did.  What did you expect them to say?  Of course you asked them the wrong question, but that's another story.

So how does "Hospital XYZ, Clueless Acquisition Target" look on a business card?


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