Snapshot

Some of the most pressing strategic issues in health care — long-term care integration, prices, medical necessity, new sources of income and leadership skills — call for additional board scrutiny.


With 2015 in full swing, most hospitals’ annual strategic planning retreats are far enough in the past to warrant a review. For sure, boards discussed challenges with reimbursement, contracting strategies with insurers, collaboration with physicians and affiliation with a larger multihospital system. Those are essentials in every hospital’s strategy. Regrettably, some important issues might not have gotten equal time.

Prices

Consumers increasingly are shouldering the burden of health costs as a result of high-deductible health plans. Employers are using pricing to negotiate directly with hospitals. And, there’s a growing array of sophisticated online tools to help consumers understand pricing better. Prices matter. Hospitals must “man up” on transparency. Key questions:

• How does a hospital compare with its competitors based on price-sensitive services?

• Can patients access comparable services at lower prices within the market? Out of the market?

• How are employers and plans assessing pricing differentials in the market and nationally? And what data are used in their assessments?

• Where are online purveyors of your hospital’s pricing getting their information, and are the data accurate?

Medical necessity

Most hospital boards assume that tests, procedures and treatments ordered by the medical staff follow standards for evidence-based care and, therefore, variation is minimal. In most retreats, after all, the “quality of our medical staff” is “our strength.” But boards must take a closer look.

Overutilization of drugs, testing and surgery is a pervasive and growing problem in the health system, and penalties for unnecessary care are substantial under provisions of the False Claims Act. Boards must understand that the hospital is culpable for the medical decisions made by its physicians and address practice patterns that deviate from evidence-based care. Key questions:

• In your plan, was a profile of medical necessity and unnecessary care a prominent discussion, and was risk-mitigation discussed?

• Is the quality of medical staff verifiable based on data about outcomes, patient experiences, safety and adherence to evidence-based practice of physicians?

• What is the institution’s strategy to mitigate risks associated with overutilization? How are offending physicians and care teams identified and remedies achieved?

Long-term care

integration

Between 25 and 40 percent of costs associated with avoidable readmissions, complications and adverse outcomes involve care coordination involving a post-acute setting. As hospitals and physicians expand their risk-based contracts with payers and employers, they will need to manage populations in post-acute settings for financial and clinical success. Most boards, though, understand little about the long-term care environment ranging from short-term rehab to nursing facilities, home care and hospice services, and others. Key questions:

• How is care coordinated with long-term care providers for discharged patients?

• Should the hospital formalize a narrow network of post-acute providers for the purpose of sharing risk for clinical outcomes and cost-management?

• What is the board’s comprehension of the distinctions between settings, business models and risks associated with post-acute care?

Diversified income sources

The Congressional Budget Office estimates that 170 million Americans will be covered under a government-sponsored insurance plan by 2023. At the same time, 159 million Americans will be covered by employer or individual plans dominated by high-deductible features with narrow networks. This change means thinner margins for the core ambulatory, outpatient and inpatient businesses operated by hospitals. To maintain credit-worthiness, and to fulfill the institution’s mission, hospitals will need to develop additional revenue streams. Key questions:

• What businesses should we pursue? What capital, operational commitments and leadership competencies are necessary to optimize the risk?

• Is the core inpatient-outpatient business adequate to sustain the organization for the long term, or is diversification necessary?

Leadership competency

In most investor-owned board settings, leadership competency and succession planning are crucial board functions, but in most hospital boards, they are rarely addressed until a problem forces the discussion. Health care is changing: Nontraditional competitors, nonconventional therapies and complicated regulatory constraints require visionary, informed, capable leadership. Key questions:

• Does the board independently discuss its succession plan for key C-suite roles? Is a formal plan in place?

• Is there a clear set of functional competencies for each C-suite position consistent with the institution’s needs and strategy?

• Is the C-suite team knowledgeable about the clinical, technological, economic and regulatory dynamics of the health care market?

• Have under-performing leaders been weeded out of the organization?

Board retreats and the strategic planning process are imperatives for high-performing hospitals, but they can be a waste of time and money unless they are thoughtfully planned and include the full range of issues and challenges on the table, including the five noted above.

Boards bear the fiduciary responsibility for the future of their institutions. Nothing is more important than getting the strategy right. 

Paul H. Keckley, Ph.D. (paul.keckley@navigant.com), is managing director at the Navigant Center for Healthcare Research and Policy Analysis, Nashville, Tenn. He also is a member of Health Forum’s Speakers Express.