At the Becker's Hospital Review Annual Meeting in Chicago on May 17, Scott Becker, JD, CPA, partner with McGuireWoods in Chicago, talked about signs of hospital sustainability. He mentioned the following factors as critical signs of whether a hospital will end up going bankrupt or being sold.
1. Does the hospital have a clear strategy for physician alignment? "It used to be if you were a hospital, you viewed yourself as in fabulous shape if a large portion of business came with physicians you didn't have a financial relationship with," said Mr. Becker. That has since changed, where throughout the country today about 80 percent of physicians have some type of financial relationship with their hospital –– up from about 60 percent a decade ago, according to Mr. Becker. Does a hospital default on a strategy where it relies on independent but affiliated physicians? If so, it should strive to be more than that in order to remain sustainable.
2. Does the hospital have high quality care? "One of the things I find most interesting is when I'm in a meeting and you have to work hard to find a board member in that meeting who would actually use that hospital," says Mr. Becker. Mr. Becker calls this a fascinating litmus test: When not one board member would want their family members treated at the hospital, that's a good sign the hospital should be sold quickly.
3. Does the hospital have a great leadership team? "When people hire people, you have a choice between talented leadership and experienced leadership, and we've found really hardwired, talented engaged leadership is more critical than experience. It's not one experience that's going to help; it's being able to respond to various situations over time," said Mr. Becker.
4. Does a hospital have a clear plan, or is it operating vaguely? A hospital can adopt various "mantras" to serve as guiding rules going forward. These strategies should be clearly understood across all levels of the organization, and sustainable hospitals' employees will be able to recite this strategy within 30 seconds. That goes to show the need for concision and definition in the plan. "It could be, 'We're going to be a leader ins hared savings programs. We're going to be an innovator. We're going to be the leader in cardiovascular services," says Mr. Becker. The goal should be well-known and easy to remember.
5. Does the system have a clear reason for being? "If you're a community hospital, the answer is probably yes. If you closed, people would have to travel much further for care. In Chicago, there might be less need for being," said Mr. Becker. Hospitals in urban or competitive markets with hundreds of hospitals, especially need a defined reason for their existence.
6. Is the hospital known for something? Closely related to that former question, hospitals need a reason patients would travel to or strongly prefer their facilities. This often comes in the form of an outstanding specialty program. There are plenty examples of these reputations in Chicago. "Years ago, the University of Chicago was the lead academic institution here. If you had a serious GI problem, you went there. On the North Side, there were also certain hospitals that patients preferred for OB/Gyn care," says Mr. Becker.
7. What is the payor mix? This factor is the wild card, as a payor mix is largely dependent on demographic traits that fall out of hospital management's control. Still, hospital leaders should not be naive about the determinant nature of a payor mix.
8. Is the hospital large enough to afford some chance investments? If not, hospitals have to make every single bet right, and that's risky. "You have to have enough size and capital to take some chances," said Mr. Becker. Hospitals with $100 million in revenue may be sustainable, but they may face the challenge of finding enough money to invest in their physician alignment strategy, for instance.
Blueprint for Hospital Sustainability and Holistic Care
Moving Toward Sustainable Healthcare: Where Should Hospitals Begin?
1. Does the hospital have a clear strategy for physician alignment? "It used to be if you were a hospital, you viewed yourself as in fabulous shape if a large portion of business came with physicians you didn't have a financial relationship with," said Mr. Becker. That has since changed, where throughout the country today about 80 percent of physicians have some type of financial relationship with their hospital –– up from about 60 percent a decade ago, according to Mr. Becker. Does a hospital default on a strategy where it relies on independent but affiliated physicians? If so, it should strive to be more than that in order to remain sustainable.
2. Does the hospital have high quality care? "One of the things I find most interesting is when I'm in a meeting and you have to work hard to find a board member in that meeting who would actually use that hospital," says Mr. Becker. Mr. Becker calls this a fascinating litmus test: When not one board member would want their family members treated at the hospital, that's a good sign the hospital should be sold quickly.
3. Does the hospital have a great leadership team? "When people hire people, you have a choice between talented leadership and experienced leadership, and we've found really hardwired, talented engaged leadership is more critical than experience. It's not one experience that's going to help; it's being able to respond to various situations over time," said Mr. Becker.
4. Does a hospital have a clear plan, or is it operating vaguely? A hospital can adopt various "mantras" to serve as guiding rules going forward. These strategies should be clearly understood across all levels of the organization, and sustainable hospitals' employees will be able to recite this strategy within 30 seconds. That goes to show the need for concision and definition in the plan. "It could be, 'We're going to be a leader ins hared savings programs. We're going to be an innovator. We're going to be the leader in cardiovascular services," says Mr. Becker. The goal should be well-known and easy to remember.
5. Does the system have a clear reason for being? "If you're a community hospital, the answer is probably yes. If you closed, people would have to travel much further for care. In Chicago, there might be less need for being," said Mr. Becker. Hospitals in urban or competitive markets with hundreds of hospitals, especially need a defined reason for their existence.
6. Is the hospital known for something? Closely related to that former question, hospitals need a reason patients would travel to or strongly prefer their facilities. This often comes in the form of an outstanding specialty program. There are plenty examples of these reputations in Chicago. "Years ago, the University of Chicago was the lead academic institution here. If you had a serious GI problem, you went there. On the North Side, there were also certain hospitals that patients preferred for OB/Gyn care," says Mr. Becker.
7. What is the payor mix? This factor is the wild card, as a payor mix is largely dependent on demographic traits that fall out of hospital management's control. Still, hospital leaders should not be naive about the determinant nature of a payor mix.
8. Is the hospital large enough to afford some chance investments? If not, hospitals have to make every single bet right, and that's risky. "You have to have enough size and capital to take some chances," said Mr. Becker. Hospitals with $100 million in revenue may be sustainable, but they may face the challenge of finding enough money to invest in their physician alignment strategy, for instance.
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Moving Toward Sustainable Healthcare: Where Should Hospitals Begin?