In my 35-year career as a health care attorney specializing in nonprofit hospital governance and my role as a hospital trustee, I have never seen a more critical time for responsible and no-nonsense board governance.

Whether you believe the Affordable Care Act is a positive or negative intervention, it underlines the need for fundamental change from the unsustainable fee-for-service structure that has created the high-cost, low-value health care system we have today. As board members, we must exercise strong leadership by asking tough questions and tasking management to act on the answers. The future of our communities' health is at stake, which is the sole purpose of our charitable organizations.

Advancements in information and communication technology enable managed care—as opposed to managed cost—to take root and flourish. These are not pilot programs like the ACA's accountable care organizations; rather, they are existing population health programs that self-insured organizations across the country are implementing, some of which will become the models for new government-payer ACOs.

Some self-insured companies have seen decreased costs; improved quality as measured by adherence to evidence-based medicine; and better health status. Physicians and hospitals are held accountable for improvements. Meanwhile, lower costs mean employers can offer more benefits. The area where most of the savings are being realized is inpatient care, which makes sense, because if care and quality are managed, employees will spend less time in hospitals.

In increasing numbers, hospitals are implementing these population health programs for their own employees. For every dollar invested, $3 to $4 is saved. But when it comes to seriously encouraging these same programs for hospital customers, it's a different story. When one hospital executive reviewed a quarterly report on admissions, he told me that he cannot afford another program that would keep people out of his hospital.

In my view, the industry knows population health programs are feasible and make sense, and the necessary technology exists. But continuing to wring out profits and capital from our existing operations to invest in these new models to keep people out of these same hospitals is like a snake eating its own tail. We must take bolder, quicker actions to become entirely different organizations.

Population health models have demonstrated that a small portion of patients account for 60 to 70 percent of health care expenditures. In one successful population program, the top risk category was defined as patients who have seen more than 15 different doctors and were taking nine drugs in the last 12 months. By managing the health of this portion of the population, hospitals can reduce costs and improve health status.

As these models become more prevalent, patients who can access their electronic health records will become even more empowered to improve their health status. Costs will further decline as more primary care and chronic disease management is provided to all segments of the population in addition to those in the highest-risk categories. We also will see fewer of these patients in our hospitals. As much as our chief financial officers might complain about declining admissions, we must recognize that this trend is good for our communities. We should adjust our strategies accordingly.

What to do? We must:

  1. Immediately implement effective population health strategies for our own employees. These are not wellness programs, which are an important subset of effective population health programs, but aggressive care management focusing first on the patients who need it most. We don't need to grow our own technology—effective systems are already available.
  2. Use this technology to serve our patients with their point of view in mind. It boils down to better care at lower cost. This strategy is not another way to control patients, pitting us against the doctors and insurance companies. We need to empower our patients, not enslave them.
  3. Change our culture to reflect this new way of providing service at all levels. For example, we cannot continue to measure success by the number of beds we manage and their relative contribution to operating margin.
  4. Extrapolate this thinking to our long-term plans. This may mean less investment in new hospitals and equipment that only can be amortized with more tests and procedures. It may mean more strategic alignment with providers across the broadest spectrum of care, including primary care providers (physicians and nurse practitioners on one end and quaternary regional academic hospitals at the other), again with patient customer interests in mind.

The only reason for a nonprofit health care organization to exist is to improve the health of the community it serves. It is not there to serve the doctors, nurses, management, employees and their unions, or even the bondholders. In fact, the reverse is true. Moving to a new model of care based on outcomes rather than fee-for-service is the answer, no matter how fast or slow the ACA is implemented. If we want to remain relevant to the communities we serve, we need to lead the way.

John D. Leech, L.L.B. (jleech@dynamis-hc .com), is a founder of Dynamis Advisors Inc., Chagrin Falls, Ohio. He is a past chairman of the board of Joint Commission Resources Inc. and is on the board of The Cleveland Clinic Children's Rehabilitation Hospital.