Mark Herzog, president and CEO of Holy Family Memorial, an integrated healthcare provider located in Manitowoc, Wis., has more than 25 years of experience leading hospitals and physician organizations.
The Holy Family Memorial network consists of more than 1,300 healthcare professionals, including 80 providers. It is a recognized leader and the largest provider of healthcare services in Manitowoc County.
Mr. Herzog, a lauded thought leader, took the time to share his views on the most interesting issues in healthcare today, new demands on hospital leaders, challenges his system is facing and what he is most excited for in the future.
Question: What are the most interesting issues you are seeing in healthcare today?
Mark Herzog: It has been fascinating in recent years to observe the increasingly wide gap between the perceptions, priorities, values and actions of 
leaders entrenched in the First Curve (fee for service) and those external disruptors driving change toward the Second Curve (value and outcomes, population health, etc.) and to watch industry measurement gurus struggle to keep up. For example, at last year's Beckers CEO Roundtable, a panel of big system leaders cited inpatient census as their go-to metric for on-plan assurance, and most bond rating reviews still focus almost exclusively on inpatient market share. Not exactly a ringing endorsement of a value orientation by those who measure provider performance! The degree of disconnect between public rhetoric level and actual change at the institutional level is rather profound, and a much wider distance than is commonly perceived. While our nation's healthcare cost increases have moderated in recent years, sustained change will require a much deeper institutional culture shift at these levels.
In addition, the nation's rush to ironically labeled "consumer-driven" high deductible health plans is similarly challenged when it comes to the principles of population health. HDHPs in our market have family deductibles in the $5,000-$15,000 range, meaning the typical family has catastrophic insurance only. Preventive tests are often declined because they sometimes lead to uncovered follow up care. Prevention is a cornerstone of long-term cost reduction and population health. Behavior by insurers and employers in this regard will have an unknown, but certainly problematic impact on societal costs. The fragmentation coming from employer-based clinics, narrow networks and marketplace-related policy jumping all negatively impact care continuity over a lifetime and exacerbates this phenomenon. It is like giving individuals the playbook but not the signals or the coach. Finding a way to connect long-term care coaching and coordination to individuals unlinked to a specific insurer is incredibly important, but unfunded.
Largely, these are natural manifestations of evolution in these complex systems. It is concerning, however, to not see a readily apparent guiding hand of policy to alleviate the fragmentation and dysfunction. I think regional solutions are possible, but they require a degree of greater good behavior that is not on many board or leadership agendas given the corporate and financially driven issues of the day.
Q: How do the changes in healthcare affect or increase the demands on hospital leaders?
MH: Today's leaders are, indeed, usually hospital leaders. As noted by author Clayton Christensen, as a business model hospitals as they are typically configured today make little sense even before considering the ACA and population health. The great challenge for hospital leaders is two-fold. First, to be able to openly imagine with their boards and/or corporate leaders what an ideal "healthcare" delivery system looks like for the population served, even if it isn't a "hospital" system. Assuming the first challenge is met, which is not an easy or likely task, having the courage to confront the cultural, political, organizational and societal dimensions and meaningfully moving towards that vision as a leader and not waiting to follow the revenue stream is the second. Few leaders have fully engaged in this process through both phases, and this is unchartered waters for our industry.
Thinking more outside the walls of the hospital organization, hospital leaders must exercise new skills in engaging communities and collaborating to be relevant in a value driven market. There is a lot of talk about physicians concluding "I didn't sign up for this" in today's environment. A lot of seasoned leaders may be facing the same question, and wondering how to develop these new competencies.
Q: What is the biggest challenge you are facing today in your market?
MH: Ironically, it is convincing employers and insurers to lower their costs through lower utilization of high-cost hospital services. We pioneered what we call Right Care, which has kept the growth in hospital charges over the last decade between 40-80% lower than the markets around us, and that has been directly reflected in group health insurance premium pricing in these markets. Despite this, most brokers, insurers and employers can only relate to per unit pricing and discounts. Doing what is right to lower our population's risk exposure to the high expenses of healthcare ought to be rewarded, and we continue to stay open to finding payer partnerships. We are a small, albeit important, part of the managed care landscape.
Also, HFM is a fully integrated physician/hospital provider. We combine these services with wellness and home-based care into a single corporation, with essentially no independent physician interaction and high level of community engagement. While this makes it easier to innovate and be more responsive to the community — something we are getting noticed nationally for — it makes it more challenging to find regional collaborators because we don't fit a preconceived mold. The hammer in search of a nail approach doesn't work when we're really focused on designing a new, better system, something we want to do together.
Q: What are you most excited for in the future?
MH: For the first time in my career I have the sense that in some environments our industry is at least beginning to move away from reflexively defending the status quo and advocating for change that is needed, but this is not always comfortable. I serve on an American Hospital Association Regional Policy Board and in March we discussed the AHA's "Redefining the H" initiative, which is opening the door to meaningful introspection, something that is long overdue and gratifying to finally see being acknowledged. Intellectual acceptance of the need for change is huge. Identification of our institutions as "hospitals" often blinds us to the reality that such institutions, given a dynamic and complex service population, inevitably end up serving the needs of our corporations instead of the needs of our community without this sort of reality check. Being open to changing to do better for our communities because we want to, and not simply reacting to external disruptors is pivotal. This is just incredibly important, and it is tremendously exciting to see more senior leaders from inside the field taking this approach to heart.
I teach from time to time at the University of Michigan, and after meeting the leaders and best of the future I am bullish on their ability to not just continue, but accelerate our national transition to a more sustainable and effective healthcare system.