Picture the post-reform health care system: Every community has its own integrated organization, where the doctors are employees and efficient teamwork makes wasted effort a thing of the past. Every patient has health insurance, a medical home and an up-to-date electronic health record.
There are many uncertainties about the future of health care, despite the passage of the Patient Protection and Affordable Care Act. While the law is unlikely to be repealed wholesale, Congress could stall rollout of specific provisions by slashing funding or watering down language. Or perhaps some of the ideas just won't work in real life, as happened with the managed care revolution of the 1990s that petered out over the following decade.
For the board, whose role includes planning the hospital's future, creating a strategic plan amid such uncertainty is a task of unprecedented complexity. Already, hospital strategic planners have accelerated the pace of their work to keep up with such new challenges as the credit crisis and the economic downturn. But within the past year, they report, there's been a new urgency in planning, requiring board members to take a crash course in health economics, and get comfortable with making bold choices amid uncertainty.
"Because of health care reform we know we will be paid differently, and that's really causing us to have incredibly short planning cycles," says Christine Gallery, vice president of planning and market development at 170-bed Emerson Hospital in Concord, Mass. "Even though we have a strategic plan with very well-articulated goals, we have to layer on top of it an almost urgent strategic plan for what we need to do in the next six to 12 months."
While many hospitals still look at a time horizon of five or even 10 years for their big-picture goals, they can't rely on that analysis for their short-term response to reform. For example, hospitals must decide whether to join or create an accountable care organization or forgo it. Getting involved with an ACO requires quick action to establish close relationships with physicians and other providers so they can qualify for bundled payments and share patient data to enable increasingly sophisticated data analysis on quality and value. That journey is shorter for some hospitals than others. Trustees have to help decide when to get on that path, and whether to take a measured or rapid pace to the goal.
"You'll need to be able to work very well in an incredibly integrated way with your physicians, and marry clinical data and quality data," Gallery says of the ACO model. "You're going to be part of continuing care, not in a silo, and information technology weaves its way all throughout this thing. You'll be paid by the episode or even by population." In Massachusetts, the bundled-payment model also is being pursued at the state level, so hospitals there are taking the concept seriously.
"We're really getting ourselves organized in a very different way, in a very short time period," Gallery says. "We're asking trustees to absorb all of this and make decisions quickly."
These reform ideas about value-based purchasing and wringing excess spending out of the system will affect every hospital, not just larger systems that have chosen to innovate.
"I think there's a feeling of exasperation on the part of hospital boards," says health care consultant Larry Walker, based in Lake Oswego, Ore., about responding to reform. "Especially among smaller hospitals and health systems, they see this gargantuan machine that's moving forward and find it nearly impossible to know what's in it.
"It's tempting to say, 'We'll sit back and see what reality comes, and deal with that,' " he adds. "But I don't think that is the right way to go."
Many hospital boards have adjusted their strategic planning processes to cope with this pace of change by creating multiple levels of strategic analysis. They perform deeper dives into the topic once a year or every six months, or when an important change comes along, such as national health reform or a big shift in the local marketplace.
David A. Kantor, president of a strategy and planning firm in Shaker Heights, Ohio, suggests keeping the 10-year plan around, but making it a high-level picture of where the organization wants to be in another decade. "Without going into major detail, you can say in 10 years you want to be a major outpatient force, have locations in 14 communities, that kind of thing," he suggests. "My rule for this is it has to fit on one PowerPoint slide in 18-point type, and don't mess with the margins," Kantor adds with a laugh, though he means it. "It's one meaty paragraph with two bullet points."
Many organizations break strategy into different time horizons.
"We think about strategy in three ways," says Diane Caslow, vice president of strategic and business planning for MedStar Health in Columbia, Md., and past president of the American Hospital Association's Society for Healthcare Strategy & Market Development. "One is truly long-term, because you can see in the themes today what will be reality tomorrow. You can make some very broad statements about the distant future."
Another approach is short term, which means looking at what is likely to happen in the next 12 to 18 months, she says. "Then there's this middle part, where strategic planning has historically fit in," she says, referring to the three-to-five year horizon.
The board of the nine-hospital nonprofit system also has a strategic planning committee that looks at strategy at every meeting and measures progress through an annual operating plan. But there are times when outside forces require an even faster response. "As health reform legislation was being formulated, it felt as though we were revising our planning documents weekly," Caslow recalls.
Boards approach strategy in many ways. Some hospitals discuss one strategic pillar at each meeting, so each focus area is reviewed on a regular basis. Others find it too hard to tease out one strategic concept from another because they are interrelated, and save strategic reviews for yearly retreats or review by a subcommittee or task force. Another technique is to relate every major decision at regular board meetings to strategy to stay on track.
Walker says boards can use any of those methods, as long as it works for them. "I'm a big believer in what works, works," he says. "There's not a real right answer on how often the strategy should be revisited."
It is important to review the progress on strategy on a regular basis to ensure the milestones connected to strategies are met or are adjusted as needed. "The worst conversation for a board to have is after the fact, 'Why didn't this work?'" Walker says.
The traditional tools of the strategic planner include missions, goals, pillars and plans. One planning method that is getting more use these days is scenario planning, which is useful for projecting the future amid uncertainty. It involves spinning out various versions of the future, discussing which ones are most probable and determining how the organization would respond.
"You paint two or three broad-brush pictures of the future overall, and people have to pick which strategies would make the most sense," Kantor says. "It's not rocket science or anything new, but doing it well can be a challenge."
MedStar finds itself using scenario planning more often as well. "We used to do straight-line projections," Caslow says. "But we need to be much more flexible now because the market dynamics may change on us fairly rapidly."
Also new is the sense of urgency around making choices from those scenarios. "We're asking the trustees to be quick about it," Emerson Hospital's Gallery says. "There isn't a lot of time to cogitate over a scenario."
Accept Rapid Change
The rapid response required to these tectonic shifts in health care is something of a culture shock to some organizations that are more comfortable with taking a slow and steady approach to change. "We know we may have had this culture that was risk averse and did things in increments," Gallery says. "But now we have to think boldly, differently. There are no more sacred cows."
As an example, hospitals are looking carefully at the physician practices with whom they have been linked for decades. If those physicians' approach to such issues as quality improvement is not the same as the hospital's, that partnership no longer may work. And given that physician relationships are the lifeblood of any hospital, it's a little scary to tinker with them.
The trustees who seem to be most comfortable in this new environment are those whose day jobs are in industries that have undergone massive change in recent years: banking and technology in particular, consultants and planners say. Venture capitalists also tend to be the board members eager to embrace the future.
"They're the ones who are pushing us the most," Gallery notes. "We have one who likes to say, 'You can't just rearrange the deck chairs.'"
Boards need to ask for education specifically about the concepts under discussion these days: ACOs, care coordination, risk coordination, clinical integration and virtual health, to name a few.
And members who have not yet grasped the basics about how hospitals get paid need to get up to speed quickly. That concept, along with how hospitals partner with their medical staffs, are the two most important ideas to understand fully, Kantor says.
"A board member told me it took him years to get his arms around those two issues," he notes. "But those are almost the entire ball of wax." Trustees need to understand those basics before they can understand how new approaches would affect their hospitals.
Much of the language being used these days about integrating the various parts of the health system and being paid by population may sound familiar; back in the mid-1990s, as managed care organizations became prominent in many markets, hospitals were told to buy physician practices and "vertically integrate." And while managed care had a huge impact in many places, it ultimately faded as consumers and physicians pushed back against the cost-cutting by insurers. Many hospitals lost money on overpriced physician practices, attempts to run their own managed care insurance plans and prematurely moving away from fee for service, which has maintained a tenacious hold on health care.
Will reform's proposed changes become reality? It's anyone's guess whether integration and value-based purchasing will take hold. But planners believe hospitals would be smart to assume that's the general trend for the future, no matter how many years it takes to get there.
"You don't want to be blindsided by just saying it's capitation dressed up in a different way," Caslow says. "You have to look at what may make the industry trend different this time around. Your competitors are looking at the same issues and are looking for new opportunities, too."
Gallery agrees that the ideas in reform need to be taken seriously. "Trustees who say it will get repealed and everything will stay the same will lose out," she says. "You have to innovate these days."
Jan Greene is a writer in Alameda, Calif.
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