8/14/2019 ARTICULO 3 HOSPITALES

1/5

mber/Dec2 0 0 8

Trends and Strategic Planning: Implications for the BoardUntil recently, hospital boards would review environmental trendsonce or twice a yeareither as a kickotlto the hospital's strategicplanning process or as one of many presentations at the annualleadership retreat. Today, however, the results of environmentalscanning activities are becoming a regular agenda item at moreand more board meetings.

The need for constant attention to thechanging environment is not surprising.As care delivery becomes increasinglycomplex and challenging, the range anddepth of issues facing hospitals and theirboards are staggering. Keeping abreast ofdemographic and consumer t rends,conomie and financial issues, advancesin infonnation and medical technology,relationships between hospitals,employees and physicians, insurance andcoverage issues, and ever-presentconcems about quality of care and patientsafety are daunting, to say the least.

Having aworking knowledge of theseissues is important for effectivegovernance. By helping hospital leadersseparate key environmental issues thatwill have a significant impact on theorganization's strategies and goals fromthose that are less likely to have a majorimpact, the board can focus on the high-leverage issues and trends most likely tohave significant near- and long-termimplications for their health c areorganization's success. -A

This workbook discusses the impactthat critical demographic and marketforces make on tbe organization andsuggests steps boards can take to dealwith those forces. Italso includes a

Readiness Assessment for boards andhospital leaders to gauge whether theirorganizations are behind, inline with, orahead ofthe curve intheir understandingof and responses to environmental change.

DEMOGRAPHIC AND CONSUMERISSUES .

C H A N G rN G D E M O G R APH IC S andconsumer behavior are now having aprofound effect on hospitals. Allindications are that America is ge ttingolder, more racially and ethnically diverse,and more chronically ill .

Relative to diversity, the Ame ricanHospital Assoc iation's 2008 E nviron-mental Assessment reports that, in2004.about one-third of adults and 40 percentof children in the country were identifiedas black, Hispanic, Asian, AmericanIndian or Alaska N at ive. The Assessmentalso reported that hospitals have notdelivered the same standard of care tothese populations as they have to whites.

A 2005 study of 46 quality m easuresconducted by the Agency for HealthcareResearch and Quality showed that blacks,Alaska N atives and American Indiansreceive worse care than w hites on 40

percent ofthe quality measures; Asiansreceive worse care on 21 percent ofthemeasures; and Hispanics receive woreecare on more than half of the measures.Acce ss to care for these populationsshowed similar results.The num ber of Am ericans with onemore chronic health care conditions alsexpected to increase by 37 percentbetween 2000 and 2030 according to tE nvironmental Assessmentand not jamong the growing number ofBabyBoomers, but across populations of allages , races and economic m eans.

A contributing factor to this increasthe growing rate of obesity. The AHA'2009 E nvironm ental Scan reports thatobesity costs U.S. businesses $13 billieach year. According to a study by theC enters for D isease C ontrol andPrevention (C D C ), 66 percent ofAmericans are now classified asoverweight or obese.

D eaths caused by poor diet andphysical inactivity liavc increased by 3percent over the past decade as well. Smanagement plans can help patients tagreater control over chronic conditionHowever, only about 60 percent ofchronically ill adults reported having tplans in 2008.

Trustee W orkbook ismade possible through thegenerous support ofWITT/KIEFFER

CE NT ER FORHEALTHCAREGOVERNANCEBY JOHN H. (HAN K) D UFFY, M ARY K. T O T T E N A N D J A M E S E. ORLJKOF

8/14/2019 ARTICULO 3 HOSPITALES

2/5

Ability to pay for care is alsotightening. Nationally, the uninsured andunderinsured population now exceeds 45million, with the sheer size of this groupaffecting the hottom lines of hospitais wellbeyond those designated as "safety net"institutions. About 50 percent of m iddle-income families report serious difficultypaying for health care and insurance., ashealth insurance premiums for employer-sponsored insurance have risen more than80 percent since 2000. A January 2007report from the Commonwealth Fundindicates that high premiums and out-of-pocket health care costs are Americans'top health care concern.

Not only are Americans sicker and lessable to pay for care and treatment., they arealso requiring more from iheir health careexperience. Baby Boomers as well asyounger patients are demanding more andmore care with a consumer-based focus.These patients want to be involved indecisions about their treatment and havethe latest health infonnation at theirfmgertipsand they want to share anddiscuss that information with their careproviders.

They constitute a growing group ofwell-informed consumers seeking a"partnership" with their primary carephysicians, who they view more as"managers" ofthe care experience. Thecare experiences these consum ers seekmust be easy, accessible and convenient.,of high quality, safe and participatory.

M A R K E T F O R E C A S T

SEVERAL MARKET FORCES a recontinuing to create a fmancial squeezefor both hospitals and physicians,particularly primary care phy sicians.The growth of public paymentprograms, such as Medicare and M edicaid,coupled with consolidation among healthinsurers has concentrated market poweramong fewer, more powerful payers ableto put pressure on providers to invest ininfonnation technology needed to respondto their changing requirements. It is alsoclear that, eventually, the govem ment willno longer be able to pay for health careunder the current reimbursem ent system.

As a result, a new era of value-basedreimbursement is emerging. M edicare's

pilot program ofthe Physician QualityReporting Initiative (PQRI) is the firststep toward requiring perfomiancc dataabout physician performance submitted byphysician practices for reimbursem ent. Aspart of this pilot, govemm ent payers arefunding providers that deliver cost-effective, quality care based on the use oftools such as electronie prescribingtechnology.

Commercial payers also have multiplepay-for-performance (P4P) programsaimed at improving both process andclinical outcomes as the basis forreimbuniement. Related to theseinitiatives, proposals for a Centers forMedicare & Medicaid Services' (CMS)requirement that electronic medicalrecords be a condition for reimbu rsementare being considered by regulators as akey tool to increase health care efficiencyand measure clinical cost-effectiveness.

Several markets also are experiencing abuilding boom, with hospitals rapidlyexpanding both inpatient and outpatientcapaeity to meet increasing patientdemand. At the same time, competitionbetween physicians and hospitals to takeadvantage of this growing demand isbecoming more intense.

Studies also show that health earedelivery and disease management willlikely move beyond hospital inpatient andeven outpatient settings. Researchcondueted by the National Center forHeaithcare Leadership describescharacteristics o f a not-too-distant healthcare future that supports this trend, such as:

The emergence of a global healthcare system focused on Wellness andpreventive care;

The transition of treatment fromdisease management to prevention, orminimizing the impaet of disease ratherthan just managing it at existing levels;

More Americans receiving healthcare from specialized centers for chronicdisease; and

Diagnostic processes enabled byelectronic data collection and monitoringdevices that patients can use at home.

These trends, along with the increaseduse of Pharmaceuticals that are taking asignificant share ofthe health care dollar,are already shining the profile of nationalhealth care spending: From 1994 to 2004,the proportion of spending on hospital

care decreased from 34.1 percent to 30.4percent.

During the same timeframe. moneyspent on prescription dmgs almostdoubled from 5.6 percent to 10 percent,according to a 2006 report by the KaiserFamily Foundation.

Another trend for boards and hospitalleaders to consider is consolidation ofpayers, physicians and hospitals withineach of their groups that will continue toaffect selected markets, as they will beinfluenced primarily by the "dominantconsolidator" in that market. For examplesome markets wiii be heaviiy infiuencedby large hospitais. such as Carilion Ciinicin Virginia; by iarge physician groups,such as the Summit Medicai Group incentral New Jersey; or by iarge payers,such as Anthem.

The impact of these consolidations caneither be oppressive or empow ering to aprovider organization. They can contributeto increased rationalization ofthe caredelivery process and wiil often lead to areshaping of reimbursement incentives.Whatever the type of consolidation, thereis increasing pressure for physicians toalign with either large groups and/orhospitals as a way to survive, if notprosper.

Howver, even with consolidation,independent community physicians willnot disappear entireiy in part, because ofthe nature of particular markets andbecause some ph ysicians wili continue tovalue independence more than income.

Changing hospitai-physicianreiationships and physician supply are alsfostering development of a new, moreintegrated medical staff model. Reframingthe traditional relationship betweenhospitais and physicians wili becomeincreasingly important as the number ofprimary care physicians continues toshrink and as physicians who vaiue themore predictable iifestyle associated withemployment join larger institutions andgroup practices rather than p ursuingindependent practice.

The movement toward more employedphysiciansin both primary eare andspecialty medicinewili be supported bytight affiiiation agreements betweenhospitais and independent physieangroups, and a dependence, but with moreconnectivity, between hospitais and

8/14/2019 ARTICULO 3 HOSPITALES

3/5

community physicians based on meetingutual needs to provide accessible, high-

uality patient care and service.The new medical stafTmodel able to

ulfill these objectives in a growing

" True partnerships b etween facilities,

enterprise Agility to respond quickly to

Connectivity across the deliverycoordination

demon strate value and ou tcomes to allThe need for technology to support

However, progress in bringing

While experts estimate that only about0 percent o f U . S . hospitals use health

However, their adoption will createthe need to plan for and

Hospitals coordinating care w ithuse of an

T I P S F O R B O A R D S

Boards can help their hospitals focus on key Issues and trends and their implicationsfor the organization's future by:

Deveioping the organization's v ision/m ission . Boards should participate Inheiplng determine where the hospitai wants to position itseif in relation to the issueand trends h ighiighted in the main text of this workbook. For example, shouid thehospitai become a dominant player in a iocai or regional market or a center ofexceiience w ith nationai or globai reach? Answers to questions iike these areessential because they will often dicta te very different strategic priorities and goals

Maintaining an ongoing environmental scanning process. This process shouldInvolve outside resources that can provide fresh perspectives, share what is workingin other ma rkets, help formulate different approaches to new challenges, andprovoke out-of the-box thinking. Results should be discussed at board-of-directorseducation sessions and retreats and not only should inform the strategic planningprocess ove rali, but also should help inform board comm ittee work to assessimplications and develop recommendations for addressing them tha t can be sharedwith the fuli board.

" Assessing organizational readiness. How prepared is your health careorganization to address important environmental issues and trends? Use theattached Readiness Assessment as a springtmard for discussion among boardmembers and other leaders about where your organization stands.

Maintaining a consumer conne ction. Boards shouid ensure tha t theirorganizations use a variety of mechanisms to stay close to consumers, such assatisfaction surveys, patient advocates and "mystery sho ppers" who can helpevaluate the p atient care experience objectively.

Exploring options as p art of the decision-making process. Boards should ensurethat th eir ho spitals have evaluated altem ative strategies to reach their goals andhave adequateiy considered the risks and rewards of each before com mitting t o acourse of action .

Seeking information and answers. One of the mo st importan t things a boardcan do is to resist a ccepting a ll information a t face vaiue. Boards have an obligationto ask management probing questions about proposais they are asked to evaluateand ensure that adequate information and analysis are brought to bear on eachstrategic issue confronting the organization.

Setting strate gic priorities. Boards shouid guide selection and priorltlzatlon ofkey strategies the hospital or system intends to pursue over the next three to fiveyears and beyond.

Mon itoring and measuring performance. Establishing measures, monitoringperformance ag ainst them and evaluating the o rganization s progress in meetingstrategic goals are all part of performance oversight, a set of activities and skillstha t is coming to be viewed as a key board competency.

increased hospital-physician gluing,suggesting that because of increasedloyalty from common data sharing andcontrol, new and innovative ways toachieve more cost-effective, higherquality care will be developed.

I M P L I C A T I O N S F O RG O V E R N A N C E

THESE ISSUES AND trends have several

working to chart the future course for thehospitals. Clearly, the rise of informedhealth care consum ers w illing to lookbeyond their community hospital toidentify providers who can best meet theineeds suggests that the global market ofthe future is becoming a reality.

Those seeking a more consumer-focused health care experience will favorphysicians and facilities that can addresstheir needs in a coordinated, efficient andinclusive manner. An accessible,

8/14/2019 ARTICULO 3 HOSPITALES

4/5

experience with docum ented outcomes isincreasingly the standard that patients andpayers will require, whether or notproviders are legally integrated.

Organizations that leam to manageclinical experience data also will be thelong-term winners. As these data becomeIncreasingly available to the public, allproviders should make their clinicaloutcom es and cost-effectiveness effortstransparent. Hospitals that "map" theplanned use of data (see chart) will bebetter positioned to ma nage the clinicalexperience.

Winners in the emerging medicalmarketplace will broaden their concept ofthe market and will think more often interms of ambulatory care.

Maintaining financial viability requireshospitals to shift treatment into lower-cost, ambulatory settings. Attracting andmaintaining a strong communityphysician network also will be critical tothis ambulatory focus.

Forging stronger connections,especially with primary care physiciansand key specialists, depends on hospitalstaking both amore active role insupporting and/or creating employmentalternatives for a new generation ofphysicians with ditTerent interests andpriorities and engaging independentphysicians in ways that meet mutual needsand goalsall with aligned incentives. T

John H. (Hank) Duffy is the founderand president oftheJHD Group, anAddison. Texas-based consulting firmthat assists large physician organiza-tions to improve their market position,operations and inanc ial results. He canbe reached at hduffy@fhdgroup.com.Reprint requests for 100 or more copiesshould be addressed to:Margaret Jablonski (312) 893-6890e-mail: mjablonski@healthfomin.com

R E S P O N D I N G T O E N V I R O N M E N T A L C H A N G E : H O S P IT A LR E A D I N E S S A S S E S S M E N T

How equipped Is your health care organization to identify and address en vironmechallenges? To gauge your organization's readiness, have board mem twrs and keexecutive leaders separately answer the foilow ing questions and score theirresponses using the scale provided. Then have both groups m eet, share and disctheir responses and the impiications for action.

1 . Do we have a process, in addition to the annual ieadershipretre at, for rou tineiy looking beyond the day-tOKlay to evaluate the bigpicture th at influences and helps define how our organization operates?

2 . Do we have mechanisms to keep us in touch w ith the needs andexpectations of our consumers, inciuding patients, employers, payersand physicians?

3. Have we committed to a trusting relationship with our physiciansbased on Joint pianning processes, transparency and confiden tiailty, acommon market strategy, and aiigned incentives?

4 . Are we leading the ma rket in physician empioyment, ieasingaffiliation, and/or network development and providing tangible supportand opportunities to all of our physiciansi.e.. the medical staff modelof the future?

5. Are we reaching out into the market and providing more servicesand points of access, and a pa tient-friendiy referral process?

6. Are we leading the m arket in ad opting an integrated(Inpatient/ambulatory) electronic medicai record (EMR), and do wehave a road map for how we are go ing to leverage data andInformation?

7. Do we provide continuity of care and a predictable patientexperience?8. Are we a ctively developing proposals for "value-basedreimbursement" to take to our payers and employers?

9. Have we developed an ambulatory s trategy based on a founda tionof market-suppo rting in itiatives such as facility Joint ventures,physician recruitment/development, service-linedevelopme nt/outsourcing, gain sharing, pa rticipating bondtransactions, management services organization/practice managementservices, and EMR Stark safe harbor investments?

1 0 . Do we have dedicated ambulatory care leadership and are wedemonstrating ambuiatory care knowledge in the marketplace?

YES N

D

D

a

DD

DDD

DD

Rating scale: Tablale (he nitmher of times you answered yes to the questions and compareyour total with the ollowing scale: I to 2-y^ou are in trouble; 3 to 5you have a foundationfor effectively addressing en vironme ntal challenges bu t need more development: 6 lo H yocan move forward with confidence: 9 to 10you have achieved star/best practice status.

C O N C L U S I O N While complexity and challenge are accepted as a matter of course in leadingand governing health care orga nizations, effective leaders help their organizations see the forewell as the trees. By helping their hospitals zero in on the key issues and trends likely to have greatest impact on performance and success and ensuring mechanisms are in place to addressthem, boards can provide the clarity, direction and focus that are the hallmark s of good ,

8/14/2019 ARTICULO 3 HOSPITALES

5/5