Issue link: https://beckershealthcare.uberflip.com/i/462190
46 Leadership & Management cessful, do they really generate revenues, do they really generate referrals back to the main hospital? Further, once a hospital seriously expands into another related market, does it need to have a more substantial presence there to be a more dominant player? For example, while Cleveland Clinic has maintained a dominant position in the greater Cleveland area, a great question is whether its national efforts are truly effective. Either way, its dominance in Cleveland allows it to test those other efforts. Increasingly, it seems like some of its ex- pansion efforts are successful and some not. Leadership and double-hatting. There are huge differences between managing a large system and a small system. In a small system, you need a tight executive leadership team, and it can be easier to assure everyone stays on the same page. In an environment where there are 100 to 200 employees, it is a lot easier to do this with a small management team that is on top of its game. I have seen many small health systems and many small chains thrive with a great core management team of four to five "A" players and a terrific larger staff. In a small system, however, it can be harder to develop and afford the next level of talent. In contrast, if you become a bigger system, there is an institutional concept that becomes more important. Great people must be in the lead of the various dif- ferent units throughout the system. In general, you never want more leadership positions than you have great leaders. Increasingly, this may mean you have a great leader "double-hatting." I have seen a situation where a great CFO, for example, also serves as president of the medical group. While this isn't ideal, it is far better to have a single great leader with great discipline and drive captain two units instead of two mediocre people leading two different units. Talent management. Critical parts of any CEO's job are to watch the big picture, keep a baseline of cost in place, focus the systems' energy on having market power, dominate in certain niches and maintain clarity about who are their customers. A core effort critical to all of this is to be constantly putting the right talent in the right spots. There is a great friction between keeping okay talent in place versus agitating and constantly changing leadership. There is a pace at which change can be made that doesn't overly disrupt an organization. In contrast, if it is in constant change, it results in cultural challenges. A leader needs to offset this concern with the cul- tural challenge of allowing greatness and not mediocrity to flourish in leadership positions. This is a constant challenge for health systems. There may be a certain gravitational pull toward leaving things in place rather than agitating for change. At the same time, organizations get stale, slow and ultimately grind in the wrong direction if they are not constantly agitating toward greatness and constantly de- veloping and grooming leaders for different leadership positions. In some ways, business today involves a certain amount of surfing. You want to have a great a team in place and focus on core priorities, but also be able to surf from opportunity to opportunity. It is less and less that any one leader can tell an organization, "This is where things are heading." Rather, the key is is starting with a core baseline business and making sure great people are in place who can adjust as needed. The great theorists are often wrong. Notwithstanding the brilliance of Dr. Michael Porter, I am convinced that few of the theorists have the next great answer. They may have an answer that works for the next two or five years, but even that is very questionable. More often, if someone can under- stand who their customer is, where their revenues come from and start by re- ally managing and developing those pieces of information — building upon the core of what works — they are more likely to succeed. For example, there is no question that inpatient volumes will continue to decline. There is no one great answer to this other than to keep costs in the system rational and to keep becoming dominant in those things where the system is making money and continually grow revenues in those areas. A system needs a clear plan to capture outpatient costs in place. Cost accounting. There is a concept of measuring costs and putting re- sources into place to track costs where revenues (and costs) are substantial enough that they are worth measuring. As I survey what is talked about in healthcare cost accounting, the literature seems to imply that the history of healthcare has been without health cost accounting. Thus, it is proclaimed in paper after paper and speech after speech that every cost must be measured. This almost assumes that hospital executives existed without cost management. Here, I suggest that cost accounting be broken down at a few different levels. First, the amount of resources needed to measure the cost of care for every individual patient without a significant condition often will outweigh any benefit of such granular measurement. Second, for any type of procedure, core treatment or mode of treatment where the cost is over a certain amount, it should be obvious that one needs to really understand the costs of care. A decade ago, the best outpatient surgical care providers started to very ag- gressively understand cost-per-case and take steps to reduce cost-per-case to where they could survive and be profitable under a certain payment method. Notwithstanding proclamations that providers must get better at measur- ing cost, I think providers must start by defining their overall costs and then measuring what is important. In essence, if you are doing a lot of procedures that are expensive, of course you need to study the cost-per-case. In contrast, if you are primarily serving primary care patients, you need to understand your cost structure to support the type of revenues that brings. Then, it is understanding whether there are outsized costs that can be normalized and whether patients can be moved to a lower costs means of service delivery. Costs need to be measured, but the concept that they have not been measured to date is incorrect. Rather, the challenge is deciding what really needs to be mea- sured and what doesn't need to be measured and allocating resources effectively. Healthcare systems, like any business, must have a very good sense of actual total spending per year. Initially, most cost containment and management starts by asking, "What are the total costs? Are our total costs this year going to be $300 million versus $295 million last year, or $310 million versus $300 million, and where are we going to find the revenues to cover that?" Then you rebound to the old adage as to how are we going to manage costs so that our revenues exceed cost? n Sell Your Surplus Surgical Inventory to eSutures.com eSutures.com Don't let your extra product inventory go to waste! eSutures.com is a discount distributor of name brand suture and endomechanicals, implants, instruments – and much more. We purchase in-date, short-dated and expired products in full selling units, open boxes and even individual loose units. 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