Recently, I participated in a multihospital system’s board retreat in which the topic of conversation shifted quickly from what’s ahead in health reform to “What do we do?” Participants were business leaders, physicians and senior management; the setting was an off-site location.

These retreats are common fare in our industry. There’s usually a lengthy PowerPoint that provides data about the hospital industry’s major pain points:

  • Increased demand and utilization
  • Increased clinical innovation and customization of care
  • Increased cost-containment pressure from plans, employers and individuals
  • Increased consolidation across the system
  • Increased transparency
  • Increased competition from traditionals and disruptors
  • Increased consumerism
  • Increased regulatory compliance risk
  • Declining margins in businesses

Most boards have seen this data. Sometimes there are surprises, but often it’s a fairly perfunctory review. What follows is more important — the “What do we Do?” discussion.

At the risk of over-simplification, it seems to me there are Eight New Rules that provide a basis for answering that question objectively. The rules aren’t changing, but they’re more evident in some markets and regions than others. And they each lend to a healthy discussion about what to do.




All health care is local

Most health care is local

• Might employers, health plans or individuals get substantially improved value by purchasing services out of market?
• Who’s leaving now?
• Why?

Physicians are customers

Physicians are business partners

• Do we have the right physicians as partners?
• Is physician leadership a strategic investment?
• Is our ideal destination a medical staff or a medical group?
• Are risks and rewards shared equitably?

Employers are observers

Employers are activists

• Do we have the ability to directly manage employer’ health needs effectively and efficiently, and assume risk for results?
• How do employers assess, measure our value proposition relative to their businesses?

Insurers are payers

Insurers are partners

• Do we have the competencies and capabilities to manage risks for population health?
• Do we need a partner?
• Which insurer is an appropriate partner?
• Is sponsoring our own plan advantageous or too risky?

Risk is about fraud (coding)

Risk is about fraud and unnecessary care

• Can we identify and mitigate risk for unwarranted variation, unnecessary care, and over-utilization for tests, procedures and medications not scientifically proven to work best?
• Is our risk for inappropriate medical decision-making manageable?

Our business is health care

Our business is health

• Should we manage preventive, chronic, acute and long-term care across traditional and alternative channels of delivery?
• Is our destination an integrated health system or hospital system?

Patients are users

Consumers are customers

• Do we have a retail health strategy?
• Are the health needs, wants and values of each distinct cohort of citizens central to our strategy?
• Do we know them?

Funding is “unlimited”

Funding is capped

• How will caps on payment by Medicaid, Medicaid, employers and plans impact margins and sustainability?
• How will funding alter capital & operating priorities?
• What are nontraditional sources of capital?
• How might non-core assets be deployed to optimize capital deployment?

Like the industry pain points, none of these is necessarily a new idea, but each contributes differently to answering a hospital’s question about what to do.

In the retreat I attended, a physician observed that there’s not much good news for hospitals and physicians these days. I disagreed. The future for health care is bright: It’s a high profile, in-demand industry that’s expected to grow 6 percent per year for the next decade. But it’s bad news if Old Rules are followed in route to answering the “What to do?” question.

Paul H. Keckley, Ph.D., a health economist and expert on U.S. health reform, is managing director at the Navigant Center for Healthcare Research and Policy Analysis. His H&HN Daily column appears the first Monday of every month. He is a member of Health Forum's Speakers Express. For speaking opportunities, contact David Parlin.