Stephen C. Hanson, MPH, FACHE, Partner, CEO Advisory Network
This is the second of a two-part introduction to a series of blogs on the future of nonprofit health systems with annual operating revenues in excess of $10 billion. Part I was published in late July and covered definitions of success and how such megasystems can be governed and led.
IV. THEY NEED TO ACHIEVE SCALE AND BE FINANCIALLY STRONG
There are several points here. First the megasystem must drive consistency around best clinical and administrative/financial practices. This is challenging enough to do in smaller organizations but will be paramount to the megasystem’s success. The megasystem must connect the dots broadly and deeply with committed physicians and other clinical leadership (and a strategic finance team) to optimize opportunities within the traditional fee for service environment as long as that continues to exist in the markets the megasystem serves. Similarly the developing best practices around value based services (including obtaining as much upside as possible from existing Value Based Purchasing) must be implemented in a consistent way across the organization.
This will require teams that believe so strongly in the mission and values of the megasystem that they consistently utilize information systems, analytics, aligned equipment/supply acquisition programs across broad geographies and different types of providers and other significant tools.
In terms of administrative and financial systemization, there will need to be strict adherence to best practices and a robust financial analysis of all the functions of the megasystem. This will include seeking every opportunity in painstaking detail for revenue, both fee for service and value based services. It will also include very tight control of expenses. The concept of “breaking even on Medicare” will become even more critical in the future and this presents an excellent opportunity for megasystems.
Finally the successful megasystem will need to focus on the markets and communities it wishes to serve. It needs to assure that it has sufficient market share in each market/state to fulfill its mission and the Quadruple Aim. Market share during this transition period will be tracked for both fee for service and value based services. Being in a low market share position in multiple markets and perhaps states will not drive the megasystem to success.
For fee for service market share will continue to be of inpatient, outpatient, emergency, home health and other major volume types.
For value based services, it will be percent of “covered lives”, primary care physicians and advanced care professionals, percentage of telehealth patients and similar measures.
Finally if the Quadruple Aim is the target, does the megasystem have the market dominance to work to improve health in its targeted populations and to truly improve the work life of its clinicians and other employees?
The currently successful megasystem forerunners have concentrated their resources in key markets and states . We project that tomorrow’s successful megasystem will concentrate similarly although in more markets; the key is to have critical mass throughout the geographies.
V. THEY NEED TO BE FOCUSED ON THE INDIVIDUAL PATIENTS AND COMMUNITIES THEY SERVE
The old saying that “all healthcare (like politics) is local” may or may not still totally apply, as mentioned above. That said, the great megasystem will need to be clearly focused on the patients and “covered lives” (people) that it serves, one patient and family at a time. Even a $3 billion health system can talk proudly about millions of patient encounters per year so multiply that by ten and the statistics are staggering.
So as the final specific element of this blog, a reminder that every decision in the Board rooms, C-suites, meeting rooms of the megasystem must remember what is at stake for each individual patient and community member.
A patient who is undergoing care for cancer or heart disease is focused on the care at that hospital, those physician offices, that organization’s urgent care centers and telehealth services. He/she does not really know or care for the most part whether the hospital is freestanding or part of a small or big health system. Only that the “high touch, high tech” care is present. The exception is where the megasystem has a strong brand recognition which denotes quality; however not all emerging megasystems have that brand recognition yet so this individual focused, consumer centric approach will build the brand over time. Thus the successful megasystem will begin and end with the patient/member regardless of its size just as smaller healthcare organizations have.
QUESTIONS FOR THE NEXT FEW MONTHS
This is the first of what will likely be many discussions about the implications of megasystems. We have begun the dialogue around many key attributes of a great megasystem.
For future dialogue:
1) What are the attributes of the systems that are, or have the most potential to become, megasystems?
2) What should the smaller organizations that wish to join megasystems be thinking about as they approach the decision to link with one?
3) What should the smaller organizations that wish to remain “fiercely independent” do to optimize their situation?
4) What are the other recommendations for megasystems beyond what is covered above in their journey?
5) How do faith based megasystems differ from secular?
6) How do megasystems interface with the startup and midstream for-profit companies transforming portions of health and healthcare?
Thank you for reading. Future blogs will also look at the “Fourth Aim” mentioned above and other key issues during this most exciting time in health and healthcare.
Steve Hanson, MPH, FACHE
August 1, 2017