| 24 June 2016
Dear interested Readers,Rerouting This Week’s Letter Toward the FutureI love Google Maps. I know that some people say that “Waze” is even better, but I have come to trust the lady from Google who patiently guides me as I try to find my way. Just how good she is has been reiterated by our attempts to use the navigation system in our new car.
I did a recent comparison between Google Maps and the system in our new car. Both plotted the same trip to my destination over the Interstate highway system. As you might imagine, I usually prefer a more circuitous course full of detours and opportunities to explore for things I have not seen. The lady at Google understands me and is not upset when I head off in an unplanned direction. Following each of my detours she carefully recalculates the best way for me to continue my journey. Her objective seems to be to get me to my destination based on the preferences I have and the choices I am making. The lady trapped in the dashboard as part of the expensive system that came with the new car never seems to get it. She just keeps telling me to turn around at the next opportunity and start all over.
Last week’s letter was a detour of sorts from our discussion of the future of healthcare. It was future oriented in that it proposed a change of tactics and attitude as we seek to find an acceptable approach to the search for a solution to the health hazards of easy access to military grade weapons. It was a diversion from the multi week project of looking at the future of healthcare through the lens of expected changes in experience, as well as changes in roles and responsibilities of various stakeholders. Now it is time to reroute our discussion so that we can resume the trip that we began four weeks ago with the objective of a more collaborative journey toward the Triple Aim.
In the first week we examined foundational concepts for the future that every stakeholder should understand. Week two was a look at the future from the perspective of the patient. Week three was a “lumped view” of the future as it will impact all healthcare professionals. This week we are getting back on track in our attempt at a systematic look at the future by examining the challenges that face nonprofit healthcare boards as the evolution of healthcare delivery continues.
I have learned a lot by attempting to to follow current trends and look forward over the next several years trying to extrapolate where our momentum will take us. The first thing I have learned is the need to be frequently reminded of just how complex, demanding and uncertain the current moment is. In that context it is easy to understand how so many people and their institutions are overwhelmed doing today’s work in a world that they cannot completely see from where they stand. That insight enables us to understand why professional burnout and institutional failure are constant threats.
Secondly, I have learned that as logical as my plan is, the execution is complicated again by the complexity of healthcare. Each of the three subjects that I have approached so far could easily be a book. A book would still not provide enough detail to understand all the nuance across all of the foundational changes as they are evolving, all of the variety of patients and the differences in their needs, all the local variation in practice secondary to geography and the distribution of fixed assets, and all of the differences in perspective of providers sorted by professional responsibility and then resorted by personal issues of income, age, gender and the myriad of differences that make us unique individuals.
What I have learned convinces me that raising the questions, giving high level and generalized predictions and making comments about how to proceed into the future as we are mired in the frustration of the moment should be my objective. My revised objective then is not to give you a complete user’s guide to the future but a mindset that will perhaps help you find your own way into that uncertainty and be a contributing part of the larger effort where, with your colleagues and those who care about your community, you can be part of progress.
As I write about the challenges that face nonprofit boards, I realize that many of my readers may know more about national, state and local government than the governance of the organization where they work or receive care. I draw on my own long history in governance to make many of my points. I realize that most of my readers have not been on a board. I also realize that they may negatively assess the performance of their own board and may even feel vulnerable to its failures. I know that at certain moments it is easy to lose confidence in a board and many professionals are suspicious of their boards and may lavish the same disdain on the board that is so easy to express toward unresponsive or distant civil government at all levels. I also believe that as our world becomes more and more complicated, we will need to understand how our boards insure the future with even more clarity than we understand the structure and performance of our civil government.
My hope is that if you have not been paying much attention to the governance of the organization where you work after reading this week’s letter you will begin to do so. I hope that if you are a manager or clinical leader who does interact with the board, this week’s letter will give you some fresh insights. Finally, if you are a member of a board, I hope you will find something here that renews, supports and extends well into the future your understanding and the importance of your “duties of care, loyalty and obedience” to your responsibility.
In the last section I deal with forecasts for the summer and all the associated distractions. Things like politics, the ups and downs of the Red Sox, and some review of the events of the last week like the political aftermath of Orlando and LeBron James’ one man show at the end of the fourth quarter of game seven in the NBA finals. Is there meaning to be extracted from these disconnected events and expectations?
If you followed all the links in the first paragraph you are up to speed on what has been presented on strategyhealthcare.com. You can access the site through the web, or if you prefer, you can connect through Facebook and “like” the site while you are there!
It Will Be a Challenging Future For Nonprofit Healthcare Boards
My first experience with governance was as the president of the student council in junior high school. It was a good experience and in a small way began to prepare me for the more than three decades of governance participation in healthcare that coexisted with the last three quarters of my professional life and continues now into my “retirement”. During the first ten years of my practice life I was focused on only two things: learning how to take care of patients despite being “trained” in one of the world’s leading academic medical centers, and figuring out how to integrate my family life and individual interests into the few minutes of time that were left over after the work of each day. I frequently stumbled and occasionally fell flat on my face in both of those activities before I realized that I could never accomplish either task and perhaps not even survive if I remained a professional loner who was always afraid of being found to be imperfect when much of the imperfection was in the system which was always adding to my stress.
I joined the governance of my practice out of my frustration and deep seated concerns. More precisely, I invaded our governance with the self righteous objective of trying to bend the course of the practice away from a new path that I was concerned was away from my interpretation of its mission. Fortunately for me, I was employed by an organization that wanted to be better and was willing to listen to me, try to help me, and even make an effort to understand my concerns, if only I would join in the collective effort to make progress. My anger and attitude had evolved through a disappointing effort to be a self serving “internal entrepreneur” and morphed into a realization that getting elected to the “Physicians’ Council” of Harvard Community Health Plan would bring me into close contact with the “suits” that had been at least part of the source of my frustration.
What I did not realize at the time was that I was taking the first step in what some of my more radical colleagues might have described as a journey to the “dark side”. Though I sought a position on the council for self serving reasons, the experience widened my understanding of what it meant to be part of a group and have a participatory responsibility in the purpose for its existence. I did not realize at the time that serving on the Physicians’ Council would be an opportunity to begin to get a clearer picture of all of the complexity involved in the support of the practice. The experience opened my eyes to the reality that much of what management did that seemed onerous to me, as an autonomous physician, was a response to external realities to which I had been dismissive or just plain ignorant.
The Physicians’ Council had been created by the negotiations that transitioned the physicians in our practice from franchised shareholders in a group practice to employees in a self insured nonprofit staff model HMO. The bylaws of Harvard Community Health Plan treated the council as a committee of the board which was invested with some very effective “reserved powers” over issues of significant concern to physicians. The bylaws also gave two seats on the board of HCHP to the Physicians’ Council, and a seat on the management committee of HCHP to the chair of the council. After about five years as chairman of the compensation committee, I became the Chairman of the Physicians’ Council in 1990. I assumed one of the positions on the board and joined the management committee as the voice of the practice.
When I joined the HCHP board, the Chairman was a very wise and generous executive of Federated Department Stores, Maurice Lazarus. “Moogie” Lazarus was a grandfatherly figure who reminded me of my own maternal grandfather who was a solid member of his community and a manager at the local Seaboard Railroad station. Both men looked like they had just stepped out of a Norman Rockwell cover on the most recent edition of the Saturday Evening Post. They both wore constant smiles, starched white shirts, brown suits with vests, bow ties that were always a little askew and they frequently chuckled, although they could be deadly serious. Moogie projected a throwback image to another day when wise and generous people went unnoticed as they devoted enormous amounts of their personal time and discretionary resources to leading eleemosynary institutions that were trying to provide a social infrastructure that was beyond the scope of what limited government could offer.
If you did not understand that last statement, I encourage you to click on the link. Not many people, including some members of the boards of nonprofit organizations, really understand what nonprofits are, how we got them, and that they are a relatively unique American form of “public-private” partnerships, usually with social missions. There are more than a million and a half nonprofits recognized by the IRS.
We are a nation of skeptics who are always fearful of decisions made at a distance. Ironically, we seem to trust people who are obviously in pursuit of their own best interest in business more than we trust the officials that we elect to govern us. More than half of our government’s budget and responsibility is related to social services. Because of our attitude, we seem to prefer that government do much of its work through private enterprise or the public/private partnerships that we call nonprofits. Much of the complexity of healthcare arises from the decision that healthcare be a public/private partnership. That stance gradually emerged through social legislation, tax law, and the evolution of healthcare as a large and profitable business sector between 1945 and 1980. Bernie Sanders’ suggestion of Medicare For All does not really change that idea because care would only be financed by government and would still be mostly delivered through practices and hospitals that are owned and controlled privately or by nonprofits. In our current state, public funds cover more than half the expense of healthcare and tax exemptions provide significant supports that are the equivalent of revenue to nonprofits. Government employs a small minority of medical professionals and owns a small fraction of all hospitals and ambulatory facilities, mostly in the VA System.
We usually do not think about the fact that nonprofits in general have evolved out of our culture of individualism and our historical inclination to distrust government that goes back to our pioneer heritage and our fear of any form of tyranny or acceptance of an authoritarian regime . This self reliant attitude has lasted at least until this election. Much of the complexity of healthcare is derivative of this culture of distrust and the mechanisms, including nonprofits, that have evolved to do in our country what governments do alone or more completely control in many other advanced economies.
In its relationship with for profit businesses and nonprofits government has great power to effect the direction that the public/private partnership takes because it pays about half of the bill and uses that leverage to impact the fee schedules. It can use its regulatory power to set the business rules and requirements that protect the public. The power of the executive branch to control healthcare is frequently adjusted by congress which has the ability to increase or decrease executive control and increase or decrease the power of the private sector and nonprofits. In history that power has been used at times one way and at other times in the other way. The power of government over healthcare is also decreased because most people prefer a non government source of care. It is fine with most people for government to pay for some or all of their care but they want to get it privately often through a nonprofit practice or hospital.
Having the delivery system be primarily owned by private individuals, publicly traded corporations and nonprofits is a counter leverage to government and theoretically protects the interests of individuals and gives some control and a voice to individuals and communities. Government pays for units of service or alternatively for value based on economic performance, quality, safety, satisfaction or any other dimension. Government may make rules, set goals and pay bills, but performance is largely controlled by institutions and individuals who present no significant sign of a willingness to give up their independence.
The role of nonprofits in healthcare is huge, as outlined in the summary of Lester Salamon's book America’s Nonprofits: A Primer:
... much of the institutional care is provided through nonprofit organizations...nonprofits still account for over half of the hospital care, 45 percent of the outpatient clinic care, and nearly 30 percent of the nursing home care...government involvement in the delivery of health services has declined sharply in recent years. By contrast, about half of overall health expenditures are financed with public funds. And in the fields of hospital, clinic, and nursing home care, where nonprofit organizations are most involved, the public sector accounts for an even larger share (more than 60 percent of the expenditures).
...the health field provides an excellent example of the "mixed economy" that lies at the heart of the American social welfare system, with nonprofit, for-profit, and governmental institutions all playing vital roles, often in close collaboration with one another. At the same time, as pressures for cost reductions have intensified, the position of the nonprofit providers in this mixed economy has come under particular stress... What this will mean for the quality, cost, and accessibility of services over the long run, however, remains very much open to debate.
I will never forget my first meeting of the board of Harvard Community Health Plan. “Moogie” had asked me to arrive a few minutes early so that we could chat. When I walked in, “Moogie” met me with a huge smile that was genuine in the goodwill and warmth that it projected. He said, “Gene, I asked you to come early so I could give you permission to ask any question during the meeting that comes to mind. There are no “stupid questions” at a board meeting. Only stupid people do not ask questions when they are not following the conversation. When you ask a question, I can assure you that some other board member will be saying ‘Thank You’ under their breath”.
I asked a lot of questions in that first meeting and over the more than a quarter of a century since that time I have continued to ask questions as I have enjoyed serving on many boards. As chair of several boards I have tried to pass on Moogie’s wisdom every time I have met with a new board member to orient them to their new responsibility. I am convinced that most board members do not ask nearly enough questions and in healthcare they often do not understand the issues that face the organization for which they have a duty to care. Before you disagree let me explain some of my personal experiences that are the foundation for that biased point of view.
I learned a lot on the Board of HCHP which after a merger in 1995 with Pilgrim Health Care, a large IPA, became Harvard Pilgrim Health Care. What I began to realize was that most board members brought the mindset and orientation of their “day jobs” to their work on the board. If you were a retailer, then every problem was an issue of inventory or marketing. If you were in hospitality or the hotel business, the issues were all about service. If you had a background in management or finance, everything was ROI (return on investment) or some other business concept like “market share”. When problems arose, solutions were extracted from whatever the business experience was of the most dominant board members.
In the end Harvard Pilgrim went into receivership (long after Moogie’s time as chair was over) because it did not pay attention to issues that were not a part of the business experience of any board member. Harvard Pilgrim hit a financial wall because the board and management forgot the importance of managing the “medical/loss” ratio and in the pursuit of growth and market share lost sight of sound actuarial principles. At one point near the end, before Harvard Pilgrim went into receivership, I was asked to leave the finance committee. I had to work hard to get a seat on finance because I was a doctor with no experience in business. After getting on the committee, I was asked to leave because I annoyed some financial professionals on the committee. I kept pointing out that you could not sell a dollars worth of healthcare for ninety cents and make it up on volume.
I learned more about the complexities of governance when I became Chair of the Harvard Vanguard Board of Trustees. I was part of the leadership team that took the physicians in the staff model practice out of Harvard Pilgrim so that we could accept patients from other payers. It was a three year process and one of the key decisions to be made was whether or not the new organization would be a nonprofit. We finally decided to try to become a 501c3 nonprofit. Along the way I learned how many people conceptualized a nonprofit as a “real cool way” to avoid taxes and acquire other economic benefits. In particular some of the board members had a very difficult time recognizing that as a nonprofit organization the “owner” was the public, and that as a board we held the organization “in trust” for the benefit of the community. A constant worry for me was that the decisions of the board would be viewed as self serving. We needed to continuously remind ourselves of our accountability to our mission. I feared that an outsider could wonder whether or not the behavior of the enterprise was more consistent with enurement than with mission.
If many board members come from a culture of “maximizing shareholder value” and they forget that the shareholders are the public and not the management or the organization’s well compensated professionals, there can be reason for worry. In the future the worthiness of tax exemption will be a constant concern for boards. I worried so much that I once asked our finance people to detail the economic value of our nonprofit status. Their answer underlines the continuing complexity of the problem. At the time, on revenues of about 1.2 billion dollars the nonprofit status of Harvard Vanguard was worth more than 75 million a year which was more than three times the small budgeted margin that was critical to our financial stability and reinvestment in the improvement of the enterprise.
Looking into the future for all boards and management teams I can predict that we can count on for sure what I facetiously label as the Quadruple Challenge Plus One:
- There will be continuing downward pressure on revenues.
- Increasing regulatory complexity and persistent audits for compliance and the detection of fraud.
- Continuing demands from all payers, the government and patients for efficiency and value. These demands may force some boards to consider mergers and affiliations.
- Operational costs will continue to rise disproportionate to revenue.
The “plus one” is the evolving professional workforce shortages and growing professional stresses relative to current work flows and the workforce shortages. This negative workforce reality will occur on top of the growing problem of “burnout”. We are moving toward the day when there will be less than one primary care physician for every 10,000 American adults. There will be more elderly patients and more patients with complex medical problems. The boards of nonprofits may discover that this is a bigger issues than the pressure on revenue.
Mine is a “cautionary” tale and not necessarily a prediction for the future decline of peace and harmony in the boardroom. Boards are usually comprised of people who have known success in their lives and I would predict that many will catch up to the rapid pace of change. Many boards are now responsibly reconsidering the value of their autonomy because they do not have the resources to maintain acceptable levels of quality, safety and service. There are many good reasons for the boards of practices and smaller hospitals to consider affiliations.
Never before has there been more need for the boards of nonprofit organizations to focus on their “duty of care”. Meeting the “Quadruple Challenge Plus One” requires boards to do much more than “hold management accountable”. The members of boards of successful organizations will need to move well beyond the body of knowledge that they bring from their “day jobs”. An advantage of nonprofits is that they are not public or privately owned and need not be caught in the trap of a focus on short term financial thinking that can be so antithetical to the support of innovation.
Financial strategy in nonprofits has been cursed by a misinterpretation of the axiom of Sister Irene Kraus, “no margin no mission”. She was advocating better management of resources and not a relentless pursuit of revenue. She also was wise enough to recognize that the inherent costs of healthcare could not be covered by philanthropy alone.
I worry that too often the voluntary boards of nonprofit healthcare are overwhelmed by its complexity and do not realize that institutions rarely “cut” their way to success. Waste needs to be engineered out of our processes and can not be eliminated just but cutting personnel and programs of care. This week John Toussaint has succinctly articulated the Lean philosophy of “management by process” in “Catalyst” a publication of the New England Journal of Medicine.
Dr. Toussaint’s article is a “must read” description of Lean philosophy and management in contrast to the status quo thinking that is supported and fostered by most boards of nonprofit healthcare enterprises. I am sure that Dr. Toussaint would agree that even the best management team motivated to implement a Lean philosophy will have a steeper hill to climb without the understanding, support and patience of an engaged board. Indeed, at both ThedaCare and Virginia Mason Medical Center, each a nonprofit provider of healthcare and perhaps our two most influential examples of Lean preparation for a better future, their boards have not only been supportive of Lean, but have been actively involved in the process of Lean transformation.
A little over ten years ago the “quality movement” was adopted and fostered by the most forward looking nonprofit healthcare boards. I believe that as fee for service is abandoned by the government and by commercial payers over the next decade, the reality that FFS has failed will be clear to most boards. Enlightened boards will recognize the benefits to the community of the shifting from “volume to value”. Forward looking boards will see that they must work with their management teams to shift their focus to new payment models and new management strategies, and away from their failing efforts to oversee the generation of more revenue to perpetuate their current system of care that is manifestly failing to achieve the mission to which they also have both a “duty of care, a duty of loyalty” and a “duty of obedience”.
I will venture one prediction for the future of which I am certain. The successful nonprofit provider organizations, hospitals and health systems will be governed by exceptional boards that will effectively partner with both private partners and government. Nonprofit boards that function well can get closer to their communities and the needs of their communities than can government which begins its work without the trust of many of the governed. Nonprofit healthcare should be able to be a bridge to a better functioning partnership across all providers. In truth, patient centricity and the health of the community are at the core of the reason for the existence of every nonprofit healthcare enterprise, a fact that their boards must not forget.
A Week of Pluses and Minuses
The picture in today’s header was taken from a kayak at about 8:30 PM on the evening of the Summer Solstice. A few minutes later I caught a nice rainbow trout. There has been so much beautiful weather and so much sunshine that it is easy to put three straight upsetting losses to the White Sox into perspective. I was in the stands yesterday afternoon to supervise the 10 inning recovery of my Sox from their “mini slide” and simultaneously experience the joy of just being in Fenway at a time of day when I was once hard at work. I felt my presence was an important contribution to their win. It is always good to nip these declines before they go too far.
I would have never predicted the sort of comeback that the Cavaliers engineered. Wow! The fourth quarter of game seven was tense. It is amazing to see nine months of effort pivot on one play. James took away a “for sure” basket with a blocked shot at the end of an amazing effort. I like it when the outcome swings on the action of a few seconds. I will admit that I was hoping for a different outcome but you must be delighted for Cleveland. Perhaps in October we will be happy for the north side of Chicago.
The most remarkable event of the week was the “sit in” in the House. I was moved by John Lewis’ speech as it began, but I was saddened that we have yet another example of the deep divide that exists between our parties. I am no longer surprised by much that happens in Washington. After a week of some of the most inflammatory comments one can imagine coming from candidates for the office of president, it is hard for me to imagine what might come next. What follows this sort of speech? Will it go on back and forth from now until November? Can either candidate survive such an intense continuous attack?
I will retreat to the seashore this weekend. Long walks on the beach with a couple of friends will get me one weekend closer to whatever will happen in November. I think we will all need a lot of long walks this summer and fall. How many miles is it from June until November? |
| Be well, send me your thoughts or a little piece to post, and don’t stop thinking about a better future for us all.
Gene
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