Strategic decisions have positioned some health systems particularly well in the past and promise to do so in the future. Respected industry leaders helped me identify eight of them: Advocate Health Care (Illinois), Banner Health (Arizona), Baylor Scott & White Health (Texas), the Cleveland Clinic (Ohio), Geisinger Health System (Pennsylvania), Intermountain Healthcare (Utah), the Mayo Clinic (Minnesota) and Sentara Healthcare (Virginia).
In studying them anew, I have relied on personal interviews as well as an extensive review of existing literature and data. And I drew on my own experiences working with a number of health systems to develop their strategic plans over the past 30 years. My key areas of study have included reputation, geographic influence, strategic coherence over time and demonstrated performance, particularly as it has related to quality.
For at least three decades, these eight health systems have shared a single value proposition — the delivery of integrated care.
Integration is the antidote to fragmentation. And fragmentation remains the greatest threat to value in health care. Autopsy just about any medical accident, misdiagnosis, failure to provide timely care, disaffected patient or unsustainable cost, and you’ll find fragmentation as a cause.
For these eight organizations, integration has been about creating a connected and coordinated system that delivers care distinguished by markedly enhanced value, including quality, safety, accessibility, satisfaction and affordability. (For an in-depth overview of each organization’s strategic commitments, visit www.hcstrategyinnovation.com.)
Each of these health systems has faced tough competitors. But the real competition has been between fragmentation and integration. Fragmentation is well-entrenched, has strong champions, pushes back and evolves. It is a slippery foe. Strategy is about moving from a place in the present to a better place in the face of resistance and uncertainty. Fragmentation offers plenty of resistance and uncertainty.
Harvard Business School professor Clayton Christensen, author of The Innovator’s Dilemma, is well-known for his concept of disruptive competition. He applied his thinking to health care in a later book titled The Innovator’s Prescription. Christensen uses a metaphor to describe fragmentation in health care and the proper role of size:
“If you take the cover off of your Dell computer, every component [is] made by a different company. ... Intel can give you faster processors, Microsoft can give you Vista, Seagate more gigabytes on the drive. But none of them [has] the technical or commercial scope to wrap [its] arms around the whole system and rethink what it is.
“Most of America’s health care system is structured like a Dell computer. ... But there are only a few institutions that have the scope to rethink it all ... that can wrap [their] arms around all of the pieces of the system to just re‑architect it.”
These eight health systems, among others, have demonstrated the kind of scope Christensen describes:
- Advocate Health Care: Advocate grew out of the merger of two health systems with flagship hospitals already recognized for quality and advanced capabilities. It was an early mover on physician employment and group practice formation, and it turned its physician-hospital organizations into a super-PHO, becoming the national benchmark for clinically integrated networks.
- Banner Health: Built around a flagship hospital and a strong operating company model, Banner centralized leadership and governance, and standardized care and management processes. Banner grew aggressively through acquisitions and new hospital construction.
- Baylor Scott & White Health: Two respected but distinctive organizations came together to form a delivery system serving a wide swath of north and central Texas (including Dallas and Temple). Scott & White brought its highly integrated multispecialty group practice model and its health plan to the merger, while Baylor brought a robust network of hospitals, surgery centers and entrepreneurial partnerships.
- Cleveland Clinic: Few organizations have been as clinically innovative and tenacious as the Cleveland Clinic has been from its founding. Once focused intently on the heart, it has leveraged its worldwide reputation into other services and diseases. A pioneer in transparency related to demonstrated value and bundled contracts, Cleveland Clinic has combined one of America’s premier multispecialty group practices with community hospitals and independent physicians to produce a powerful economic engine.
- Geisinger Health System: A large, sophisticated medical center in a small town serving a big chunk of rural Pennsylvania, Geisinger has focused on building deep intellectual capital related to care management. It is internationally recognized for innovating at the interface between health insurance, inpatient care, outpatient care and physician practice. Few organizations have positioned themselves as purposefully as Geisinger for the transition from volume- to value-based payment.
- Intermountain Healthcare: The late W. Edwards Deming, a quality icon, was a central inspiration for Intermountain’s relentless battle to drive out variation. While many health systems treated total quality management and its variants as a passing fad, Intermountain dug in and made it a way of life. The presence of Intermountain contributes greatly to Utah’s position as one of America’s healthiest places to live.
- Mayo Clinic: No organization has built as strong a brand for quality as Mayo. Its strength flows, to a great extent, from the team-based multispecialty group practice model that has been central to its operations since its founding, along with its unwavering focus on putting patient interests first. The "Mayo way" is well-engineered and nonnegotiable. No organization has deeper, better-connected data. Once satisfied to be insular, Mayo is stirring.
- Sentara Healthcare: When other systems experimented with ownership of health plans, then exited in the face of losses, Sentara persevered. When physician employment became too big a financial burden for others, Sentara doubled down. Because it persisted when others folded, it was able to put more than two decades of experience into its intellectual bank vault. It learned to meld a managed care enterprise, a hospital enterprise and a physician enterprise into a formidable integrated delivery system.
These eight health systems didn’t wait for health care reform to move them down the path toward integration and value. Indeed, their initiatives provided models that the Centers for Medicare & Medicaid Services and other government agencies have attempted to emulate. These health systems positioned themselves to manage care by moving down one of four integration pathways.
For Mayo and the Cleveland Clinic, the integration path was paved by their century-old multispecialty group practice model in which team‑based delivery of coordinated care wasn’t an option but a requirement. Intermountain, Baylor Scott & White and Sentara’s path toward integration involved owning a health plan, while Geisinger had the benefit of an already well-developed multispecialty group practice model when it stepped into health plan ownership. Advocate’s path ran through development of its physician-hospital organization and clinically integrated network. For Banner, the path involved creating a tight operating company model for every piece of the system, including hospitals and physician practices. These four paths have coalesced as they’ve converged on the same destination – integrated care.
Two shared characteristics stood out in all eight systems. First, each had a well-established reputation for delivering high-quality care. This reputation often had been resident in star physicians and flagship hospitals before the systems were built out.
The second common point of differentiation was wide geographic distribution, usually developed as a result of acquisition and mergers. Such wide distribution expanded access, created leverage with insurers and pushed the health systems' brand identity into new markets. Wide geographic distribution also diversified the systems’ portfolio of markets, so a slowdown or setback in one could be averaged out among the others.
Focus is an essential characteristic of any truly strategic organization. These health systems demonstrated an ability to home in on those strategic commitments that made the greatest contribution to their value proposition of integrated care.
Ten driving strategies can be seen at the eight health systems over the past decade. The emphasis on each strategy has varied over time and by organization. They are interrelated and not in any particular order:
Offer advanced capabilities to sustain consumer awareness and preference. Advanced clinical capabilities in the form of physician expertise and technology were legacy commitments emphasized from the onset at Mayo, Cleveland Clinic and Geisinger and were embedded in the flagship hospitals of the other five health systems.
Fortify a quality brand. Advanced clinical capability carried with it an expectation of higher quality outcomes. But to be sustained, differentiation on the basis of quality had to be demonstrated with data showing superior outcomes. Because of their higher levels of integration, these systems have been able to provide such evidence.
Standardize care processes and management. Key to quality and affordability is driving out variation wherever possible. And moving beyond variation requires standardization. Quality of care, quality of leadership and quality of management all rely on a degree of standardization. It is impossible to deliver a high-quality service without the reliability and consistency that standardization delivers.
Require teamwork. Addressing the U.S. tradition of independence in medicine is fundamental to delivering coordinated care. Teamwork is essential to bringing to bear multiple sources of expertise and experience. To have an impact, teamwork can’t be optional, and it must be facilitated by structure and technology.
Develop partnerships of trust with physicians. There is absolutely no way to effectively manage the quality, access and cost of care without physicians’ active and committed involvement. And there’s no way to foster productive physician involvement without including physicians as trusted partners in the system’s most important work.
Create proximity and productivity through electronic connections. It’s not practical to move all physicians and patient care into close physical proximity. The benefits of proximity and connection have to be created electronically. Providing the right information at the right time to the right people in the right place is the highest use of information technology in health care.
Manage risk. It’s never a good idea to turn your back on risk. Risk invariably has two traveling partners: danger and opportunity. These health systems embraced and managed risk in its many forms — in new ventures, in innovation and in business arrangements. When they began their pursuit of integration, there were few maps to guide them.
Pursue growth that expands access and influence. The best use of size is to make expertise and services more broadly available. For a health system, market influence arises from the number of individuals served. More patients and enrollees mean more influence. Access is obviously critical to market share. And suitable market share growth is the surest way to improved financial performance and deeper experience.
Restructure to enhance integration. Strategy drives structure, or at least it should. These health systems either designed themselves from the onset for integration or fundamentally restructured themselves to enhance connections, communication and coordination systemwide.
Cultivate network effects. The most recent phase in integrating these health systems has been their investment in extending themselves beyond their core campuses and facilities through networks of affiliation. Bricks and mortar are notoriously immobile, expensive and difficult to merge. Knowledge, on the other hand, is inherently portable and malleable. Through arrangements that resemble franchising of intellectual property, these health systems are leveraging their deep investments in expertise and innovation.
It’s often suggested that strategic success depends not only on the quality of the strategy but also on the quality of execution. There have been a consistent set of behaviors that have characterized the execution of strategic commitments by each of the eight health systems:
Continuity and consistency over extended periods of time. These organizations stuck to their commitments, even through periods of significant uncertainty and disruption. They also extended their strategies throughout their systems, along with the operational activities needed to support them. Longevity in leadership was key. CEO tenures ranged from seven to 21 years, with an average of about 14. Ultimately, an organization’s strategic mindset must emanate from its leaders.
Flexible persistence gave rise to purposeful agility and opportunism. Mayo Clinic was born out of a storm — an F5 tornado hit Rochester, Minn., in 1883. That disaster precipitated the formation of the clinic and solidified the core beliefs of its founders. The Cleveland Clinic burned to the ground about the same time as the nationwide bank collapse in 1929. Instead of walking away, the founders rebuilt the clinic and added two floors. None of the systems progressed in quick, bold strokes. Instead, they experimented their way forward. They gradually invented their own paths toward integration.
Nonnegotiable commitments were essential to fighting fragmentation. Each of these organizations demonstrated tightness not found in most other health systems. Some things were beyond negotiation. Driving out variation was not optional. Executives, physicians and staff were required to adhere to standards that yielded integration and value.
Focused accountability in pursuit of value ran through each of the health systems. Constructive competitiveness drove them to demonstrate superior performance against a worthy standard: value. Because of the clarity of their intentions, including their establishment of measurable goals, accountability for value became a reality rather than a nebulous and unfocused aspiration.
It’s taken at least 30 years for these eight health systems to deliver on their value proposition of integrated care. I believe that many other health systems can accelerate and strengthen their commitment to value by emulating the lessons these eight embody. No commitment will serve U.S. health care better.
Dan Beckham is the president of The Beckham Co., a strategic consulting firm based in Bluffton, S.C. He is also a regular contributor to H&HN Daily.