Lynn Nicholas, president and CEO of the Massachusetts Hospital Association, is one of healthcare's most influential leaders. She has risen through the ranks of various leadership positions until joining MHA as chief in August 2007. By that time, she already had more than 35 years of hospital and association experience.
Having previously served as executive vice president and COO of the New Jersey Hospital Association and president and CEO of the Louisiana Hospital Association, Ms. Nicholas possesses a range of leadership experience and capabilities. She is well versed in discussing the challenges and effects of the Affordable Care Act, as well as those from state-based reform. Massachusetts had its own state reform law passed under former Governor Mitt Romney in 2006. Ms. Nicholas will be discussing these challenges in greater depth at Becker's Hospital Review Annual CEO Roundtable + CFO/CIO Roundtable in November in Chicago.
Ms. Nicholas took the time to discuss what she expects to see in the next five years, potential effects of repealing the ACA, Massachusetts' healthcare market, her strategy for building a leadership team and the most memorable piece of advice she's ever received.
Question: What do you think are some of the most significant challenges hospitals and health systems will face in the next five years? In your 
opinion, what do healthcare leaders need to do to combat these challenges?
Lynn Nicholas: The biggest challenge is what I call 'straddling the fence.' While [hospitals] are trying to make the transition away from fee-for-service and volume-driven healthcare to population health, the challenge is ensuring goals and incentives are aligned. When you're in one payment setting or the other, goals and incentives are usually the same, but when you're in the middle of the transition, it gets very confusing.
Our members — hospitals in Massachusetts — want to see the transition to global payments, whether it be bundles, full capitation models or some kind of risk-based incentive payment. They want that to happen yesterday. What compounds that transition phase is that Medicare and Medicaid are growing every year as an overall percentage of payment to hospitals, but the actual payments per patient encounter are shrinking due to the ACA and the 2013 BBA Sequestration cuts, which will be in place for another nine years. That's a real challenge because commercial payment increasingly cannot make up for that difference, when historically, it often did.
Hospitals need to integrate services and care delivery throughout the full continuum and not just focus on the inpatient portion of care. They need to do this through a full vertical integration, which may be an owned integration, or a virtual integration, in which they're dealing with providers that have contracts with aligned incentives.
Another important strategy is to somehow, as hard as it may be, make the investments in health IT so hospitals can have EHRs that work across the continuum of care. It's not just a matter of capital investments — though these are large — but also dealing with cultural pushback and accepting a temporary decrease in efficiency. What happens is when systems bite the bullet and install a new sophisticated system, they initially see a decrease in productivity and satisfaction, but the EHR will pay off in the long run.
Q: The U.S. will elect a new president in 2016. Most of the primary Republican candidates are conservatives and pledge to repeal and replace the ACA. If one of these candidates becomes president and takes action against the ACA, what are some of the repercussions healthcare organizations and Americans alike will experience? Do you think this is a likely outcome, and what is at stake here?
LN: I hope this is just more continued blustering and posturing, and I think it would be a huge mistake if [the ACA were repealed]. I don't think it will, though, because the [Republican candidates] don't have a replacement strategy and consumers who have gained coverage will rebel.
In terms of what's at stake, I don't think much would be affected here in Massachusetts. Maybe we'd lose subsidized funding, so the cost of Medicaid to the commonwealth would go up, but providing healthcare to all is hardwired in our health policy. Massachusetts gave birth to the whole concept of universal coverage. A key part of the ACA — what holds everything together — is the individual mandate. We had that before the ACA.
I get to talk with 49 colleagues with the same role as me in the other states. In the states that have not expanded Medicaid or taken advantage of what the ACA has to offer — there is a growing and unfortunate divide between the haves and have-nots related to healthcare access.
If some folks can only get care in an emergency room and others have access to primary care and services, it's a health policy travesty. It's hard to believe we're the only industrialized nation that doesn't really have a comprehensive system from border to border, and shame on any party if they move us backward in that regard.
Q: What are you most hopeful for or optimistic about in healthcare in the next five years?
LN: The quality of care and the overall patient experience is really improving. I think the catalysts that will move that even faster are global payment and accountable care with aligned incentives for the various providers that patients may encounter, not just hospitals. With that focus, consumers are naturally more engaged and activated to improve their health. It's a synergistic strategy.
Because more and more hospitals are using risk-based payment across the commonwealth, we find that providers — especially physicians — find that it's more edifying work. This is facilitating a team approach to care instead of a traditional hierarchical approach, and they're getting better outcomes.
Q: What is one of the biggest challenges Massachusetts hospitals are currently facing?
LN: The shift to risk-based reimbursement has spawned a great deal of consolidation among hospitals and physician groups, with a strong focus on being more efficient, reducing readmissions and unnecessary care. Inpatient volumes have continued to go down with a greater shift to care being done in ambulatory settings, which is good, but that is creating pressure on the workforce. Almost all hospitals here have had layoffs to right-size their organizations to meet these new realities.
Labor unions are very threatened by that. One in particular is attempting to intervene through a ballot initiative in an effort to save jobs for their members. The ballot initiative would impose a regulatory pricing framework on hospitals, to shift commercial payments around. This is a dicey issue, because a ballot initiative would raise the level of regulation and bureaucracy, which most of our members see as counter-productive as they attempt to shift away from fee-for-service. While some hospitals naturally want better commercial payment, all of them are opposed to a ballot-driven approach.
Q: What is unique about Massachusetts? What must healthcare executives in the commonwealth factor more into their strategies than they would if they were located elsewhere in the country?
LN: Massachusetts is unique because most of our care is delivered in teaching hospitals, which are inherently more expensive. Nearly 46 percent of all patient days in Massachusetts are in teaching hospitals, while nationally that average is 19 percent. Since we do have more teaching hospitals per capita, patients tend to select them over local community hospitals, and this creates tension between some community hospitals and teaching institutions unless they are all in the same system.
Another factor that makes us unique is we have boatloads of transparency. There's a state agency that monitors, in great detail, the cost of healthcare from total medical expense down to a provider level. We passed a law that sets a healthcare cost growth ceiling, and that ceiling is designed to align the cost growth of care to the growth of the economy. For the last several years, our growth trend has been well below our target of 3.6 percent growth for total medical expenses. However, in 2014 it went above that rate. What's driving that is primarily spending on the Medicaid population due to a failed state exchange issue and the growth of pharmaceuticals and drug costs. It's not driven by hospital care or the cost of stay. We are doing a good job of bringing those down, but other factors are driving it up. The hospitals will have to respond to that.
Q: What is your strategy for building a team? What does an ideal team or support system look like to you?
LN: I like to make almost all decisions with the full team's involvement. I let them be part of the process to consensus on a particular direction, which helps ensure buy-in. I like to assign projects that require team effort and leave it up to them to figure out how to achieve the expected outcome. I don't step in unless they ask questions or for help. I've found my team finds great satisfaction working with those they wouldn't normally work with and building bonds.
An ideal team is one where each member is full of new ideas. They're always challenging the status quo and thinking of new ways to do something that's historically been done one way.
I have no tolerance for nonperformers. The challenges in healthcare are too heavy to tolerate people who can't perform. If they can't keep up with our pace, culture and work with a team, they aren't a good fit.
Q: How do you deal with naysayers and resistance to change?
LN: I am a change agent inherently. My entire career has been driven by my desire and success at being a change agent. I have little tolerance for naysayers and people who want to maintain the status quo. While I don't want groupthink or people who just say 'yes' to everything, if someone is always negative or resistant to change, I don't make the investment to bring them along. There is too much work to do, too many priorities and too many great people in healthcare to waste time on people who drag everyone else down.
Q: What is the most memorable piece of advice you've ever received?
LN: I hear and read a lot about what my hospitals are doing, but I'm not personally in the bowels of the hospital anymore. One piece of advice that really hit home with me came from a hospital CEO. She said, 'You don't know what you don't know.' I really took that to heart because healthcare is so complex that you have to consider many perspectives. I try hard to listen, learn, ask a lot of questions and get a lot of input from others before making decisions. However, ultimately it's up to the leader to execute — you don't want 'paralysis by analysis.'
Note: Interview has been lightly edited for length and clarity.