Leadership: Both Potential, Peril Foreseen

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Chief executive officers are finding it difficult to discern what initiatives will ensure their organization's long-term success in the face of health reform, but that doesn't mean they're standing still. Nor are they using the economic crisis of the past 18 months as an excuse for their challenges. So say the CEOs in the HealthLeaders Media Industry Survey 2010.

In fact, CEOs are focusing much of their time and effort on finding constructive ways to mitigate the effect of the financial crisis on their institutions. We asked them to assess the effectiveness of 10 strategies in addressing the economic downturn. Supply chain initiatives were seen as most effective with nearly 80% finding them either slightly or highly effective at dealing with the crisis, which surprised one CEO who recently discussed the survey's findings.

"It's essential, because supplies are about 20% to 25% of your costs, but it surprises me that supply chain is so high," says Jim Montgomery, president of Touro Infirmary in New Orleans. "We've instituted several supply chain initiatives. It's something we feel can be effective in reducing costs without sacrificing quality or sacrificing programs," he says.

Revenue cycle enhancements were No. 2, seen by 73% of CEOs as effective. Interestingly, revenue cycle received a slightly higher "very effective" rating than supply chain, at 22.61% versus 20.29%. Cutting capital expenditures, a quick-and-dirty way to preserve cash in a downturn, was fourth on the list, seen by 65% of CEOs as effective, but Montgomery argues that it can backfire. "Cutting capital is a cash-preservation situation. If you have to do capital cuts over any prolonged period of time, it can reduce revenue," he says. "We're focusing most on rationalizing our service lines," he says.

Indeed, emphasizing higher-dollar procedures might serve hospitals well beyond recessionary times, as the survey showed that almost 60% of CEOs found that strategy to be effective and it came in at No. 5 on the list. Physician alignment was No. 3 overall, considered effective by 66%, but actually had the highest percentage of "very effective" choices (27%).

Other CEOs agree with Robert Garrett, president and CEO of 775-licensed-bed Hackensack (NJ) University Medical Center, who sees health reform legislation as a potential crisis for those who fail to heed its broad implications for healthcare's business prospects in the mid- to long-term.

"As healthcare reform emerges and physician-hospital partnerships increase, more practicing physicians will be interested in the employment model," says Garrett. "It's among our top three priorities. We've offered an employment model to our community cardiologists. That's resulted in enhanced quality [and] stabilized the service line and allowed it to grow, and they're more loyal to this institution."

Montgomery doesn't have the advantage of state laws that prohibit self-referral, so employment of physicians is less attractive in Louisiana.

"Our major difficulty is that physicians have competed with us at such a level and 'niched' us to death," he says. "There's talk of a new surgical hospital here being built by the doctors, and even though there are provisions against physician self-referral in the reform bills, the damage has already been done, and it has been very damaging."

Garrett sees cardiac and vascular services and cancer as huge growth areas, along with neurosciences.

"Subspecialties in those two areas have real potential for growth. The other big one is women's and children's," he says.

Philip Betbeze

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