An article published last week by Becker’s Hospital Review discussed ten concerns and trends that can be viewed as opportunities and/or threats depending on the hospital’s size, market and other factors. The article is linked below; here’s a high-level summary:

1. Growth of High-Deductible Plans – Patients are looking for lower-cost healthcare options, including urgent care centers and other clinics.

2. Growth of Accountable Care Organizations – An analysis conducted during May identified 626 ACOs covering 20.5 million lives in the country; expect more ACOs led by hospitals and physicians for Medicare, Medicaid and commercial health plans.

3. Intensity of Rivalries – Competition for patients, doctors and payer contracts is intensifying, however, the intensity varies across geographic areas; rivalries are developing not only locally, but also nationally and sometimes even internationally.

4. Reduced Inpatient Procedures – The average inpatient procedure generates revenue that is 600% to 1,000% higher than outpatient procedures; declining numbers of inpatient procedures appear to be occurring across all service lines offered by hospitals.

5. Layoffs – Approximately 100 hospital layoffs have been noted so far this year by Becker’s Hospital Review.

6. Narrow Networks – To attract consumers by offering low premiums, some insurers are selling narrow-network policies through the ACA health insurance exchanges; hospitals in these narrow networks are at risk for decreased revenue due to lower payment rates, which is typically not the case in broader contracts; however, hospitals that avoid these narrow-network contracts are vulnerable to losing market share.

7. Shift to Population Health/Managed Care – Providers are increasingly embracing pay-for-performance models; a study published last month by McKesson found that 81% of hospitals and 90% of payers have signed on to or are currently offering complex reimbursement models that combine fee-for-service and other models.

8. Huge Growth in Health IT Spending – A survey of hospital executives completed this year by the research firm Premier found that almost half of the executives said their largest capital investment this year will be for health information technology.

9. Competition for Physicians – The nation’s aging population will contribute to a shortage of physicians in the US; one study shows a shortage of 130,600 physicians by 2025, and another study shows the need for specialists to care for the elderly will double between 2013 and 2025.

10. Staying Independent – Standalone hospitals with revenue under $300 million will face greater difficulties because of: a) their lack of clout with payers, b) the need to invest large sums in health information technology, and c) the shift to pay-for-performance.

For more details, see Becker’s Hospital Review at: http://www.beckershospitalreview.com/leadership-management/10-concerns-and-trends-facing-hospitals-right-now.html
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In a report published this month, McKinsey & Company provides key insights based on interviews conducted with thousands of patients on their perception of digital healthcare services. The interviewees formed a varied cross-section of different age groups and incomes, as well as varying levels of experience with the technology services that are increasingly an integral part of healthcare delivery.

Results of the survey (available at the link below) revealed some surprises in terms of how patients view the technology. The report also provides information about how hospitals and other healthcare providers can approach the implementation of digital services for patients. Key findings include:

(1) Over 75% of all patients would like to use digital healthcare services in the future if those services meet their needs.

(2) Patients in all age groups (not just young patients) expect to increase their use of digital services.

(3) The adoption of digital services by patients is primarily driven by patient awareness of the services and the quality of how the services are implemented.

(4) The demand for mobile healthcare apps is strongest among young people, especially apps geared toward younger demographics, for example, apps focused on prenatal health or “healthy lifestyle” choices.

(5) When introducing digital healthcare services, it’s important to understand: a) what patients really want, b) the best way to provide the digital services, and c) the value of starting small.

(6) When planning for digital services, segment your initiatives according to criteria such as: a) the amount of investment required, b) the estimated demand by patients, and c) the value created by the services.

The report makes a conclusion that the time is now ripe to take advantage of digital services in terms of capturing the attention of patients and building long-term value—however, the keys are to understand what patients really want and avoid the pitfalls of five prevalent myths, which are listed in the report.

To learn more, visit: http://www.mckinsey.com/insights/health_systems_and_services/healthcares_digital_future
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According to an investment analysis published July 6 by The Motley Fool (link below), urgent care clinics are a rapidly growing profit center for hospitals. Not only are the clinics profitable, but they’re also a key source of future referrals to hospitals. Additionally, the analysis notes, “10,000 baby boomers are turning 65 every day and they’re going to need more care.”

In the past three years alone, HCA has spent more than $5.5 billion to open 200 new urgent care centers (stand-alone ERs, provider clinics and surgery centers). In an example of how HCA is implementing its strategy in the Nashville area, they’re operating 11 urgent care centers to complement their 10 hospitals and 40 provider locations. Additionally HCA is planning to spend over $2.0 billion this year on new growth projects, which include urgent care centers.

Other examples of hospitals getting into the business of stand-alone clinics include Dignity Health System, the fifth largest hospital operator in the nation. In 2012, Dignity acquired a chain of 172 clinics under the brand name “HealthWorks” and they now operate more than 200 clinics.

In May, Tenet Healthcare launched a branded chain of urgent care centers named “MedPost,” which currently includes 23 clinics in eight states; Tenet plans to double their number of clinics before the end of this year.

The report also notes that hospitals are under pressure from insurers to get into the business of stand-alone urgent care. Humana acquired 300 Concentra urgent care centers in 2010 and, as a result, the insurer can now offer its members a less expensive option than going to a hospital.

Humana’s entrance into the urgent care market also further blurs the line between payers and providers. From Humana’s point of view, their foray into clinics “transforms care from an expense that it has to pay into a profitable business.”

To learn more, see the article, “How Urgency Will Save Hospitals” at: http://www.fool.com/investing/general/2014/07/06/how-urgency-will-save-hospitals.aspx
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A 12-page “Trendwatch” report published in June by the American Hospital Association (AHA) provides excellent guidance on how hospitals can adjust their operations to remain competitive in light of the Affordable Care Act (ACA). The report (available at the link below) discusses the impact of the ACA on multiple variables:

1) Increasing coinsurance and deductibles will make consumers more price sensitive at the point of care

2) Consumers will demand cost information to guide decision-making

3) Providers will carry the burden of patient education at the point of care

4) Greater exposure to costs may lead to delayed or avoided care

5) Higher patient cost-sharing can increase bad debt

6) Hospitals may lose volume to lower-cost providers

7) More options leave consumers to balance multiple plan features in decision-making

The bottom-line takeaway from the report is that hospitals will have to implement new strategies to succeed in today’s rapidly evolving marketplace, where consumers are more actively engaged in the purchase of coverage and care-delivery services.

At the end of the report, the AHA provides five strategic questions for hospital executives, including options for how to answer/address those questions. This is a valuable report for all hospital executives and will help you provide proactive “thought leadership” throughout your organization.

The report is available for download at: http://www.aha.org/research/reports/tw/14june-tw-consumerchc.pdf
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This week Becker’s Hospital Review published an article about actions that hospital CEOs can take today to help ensure their future success:

1. Get involved – this could include joining a new local or national healthcare association, which will provide you with more exposure and additional networking opportunities.

2. Embrace change – keep an open mind, even when potential opportunities seem out of the ordinary.

3. Be visible – engage employees on a personal level; and for larger organizations, consider social media as a way to remain “visible” even when you’re not physically present.

4. Delegate – learn to trust your people; you need a team effort to be successful.

5. Have free time – be sure to schedule free time if needed, especially if you are in “continuous work mode.”

6. Read – never stop learning; use reading as a way to stay in touch with ongoing developments in the healthcare industry.

7. Make tough financial decisions – don’t be afraid to “step on political landmines” in order to control costs.

You can read the entire article at Becker’s Hospital Review by visiting: http://www.beckershospitalreview.com/leadership-management/7-things-ceos-can-do-today-to-advance-their-careers.html
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This week I’d like to bring to your attention another key resource for hospital executives. It’s a book that’s part of the ACHE Management Series, titled, “Leading a Hospital Turnaround: A Practical Guide.” Whether or not you may be currently involved in a turnaround situation, this book is an excellent resource that will also help you recognize the early warning signs of impending financial problems.

The author, Anthony K. Jones, has served as CEO of two health systems and COO of four large medical centers. He also has extensive experience improving the performance of hospitals in financial difficulties. To learn more about what this book has to offer, visit the ACHE website via the link below.

Also on the subject of turnarounds, Becker’s Hospital Review published a brief article this week about the traits of a successful “Hospital Turnaround CEO.” In the article, Raji Kumar, CEO of Dallas Medical Center, shared her thoughts on five key traits that helped her transform the hospital. When she accepted the CEO position in 2010, the medical center was losing approximately $2 million per month. Last year they reported a $5 million profit.

During the turnaround, Dallas Medical Center added service lines, including cardiovascular, spine, and gastroenterology, and they recruited nearly 100 physicians to join their staff. Here’s a brief summary of Ms. Kumar’s thoughts about leading a successful turnaround:

Have a Clear Vision – Establish a plan/roadmap for attaining the vision and then follow through to implement the plan.

Communicate Effectively – Use the plan/roadmap to engage employees, communicate the big picture, and inspire them to buy into the strategy.

Make Decisions – Avoid “analysis paralysis” and take prudent risks based on available information.

Recruit and Develop the Right Staff – Assess the need for changes in management when departments prove to be problematic.

Manage Resources Efficiently – Find ways to empower employees and inspire them to take ownership of problems.

For more information, visit these websites:

ACHE: https://www.ache.org/publications/Product.aspx?pc=2240

Becker’s Hospital Review:
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Following up on last week’s blog on key resources for hospital executives, the Agency for Healthcare Research and Quality (AHRQ) offers valuable information on transformation and other improvement initiatives. Their website (link below) provides insight into topics that should be top-of-mind in today’s environment.

The Consumer Assessment of Healthcare Providers and Systems (CAHPS) surveys are a case in point. The results of CAHPS surveys, which ask patients to report on and evaluate their experiences with providers, are in the public domain. The data is not only accessible to healthcare consumers but is also used by public and private purchasers of healthcare, regulators, quality monitors and community groups. Organizations and consumers will increasingly use the survey results to inform their decisions about healthcare services.

Other topics addressed include AHRQ Quality Indicators (QIs), which are metrics of hospital quality and safety derived from readily available hospital inpatient administrative data. Hospitals across the country use the QIs to track their performance over time as well as identify potential problems related to quality and safety.

Hospital construction is another key topic. Approximately $200 billion will be invested over the next ten years to build new hospitals. As noted by the agency, “the United States is embarking upon one of the largest hospital building booms in the nation's history… this new construction is being undertaken to replace aging hospitals, incorporate new technologies and medical practices, and respond to external market factors, including America's growing and aging population.”

To learn more, visit: http://www.ahrq.gov/index.html
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“Hospitals in Pursuit of Excellence” is a key resource offered by the American Hospital Association. It’s a web-based platform that provides executives in the healthcare industry with comprehensive information about how to “accelerate performance improvement and support delivery system transformation in the nation's hospitals and health systems.”

At the website (link below) you can find information on hospital best practices, guides about evidence-based medicine, and briefings on national projects being undertaken to improve hospitals. In their Resource Library, you can sort through available materials by categories such as:

Care Coordination
Care Delivery Transformation
Operational Excellence
Patient Safety and Quality

Additionally, you can easily locate resources that pertain to your particular type of hospital, such as Children’s, Community, Critical Access, Health System, Public, Rural, Small, Teaching and Urban.

You can visit the Hospitals in Pursuit of Excellence website at: http://www.hpoe.org/
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In a report released last month by the American Hospital Association, a survey of 1,100 healthcare executives revealed emerging “talent gaps” in hospital management. In the report, titled, “Building a Leadership Team for the Healthcare Organization of the Future,” the executives cited key gaps in their organization’s capabilities. Pinpointing the areas where more skills are needed:

54% said their management teams needed more experience leading nontraditional health partnerships, including strategic partnerships with payers and retailers

48% cited a need for greater talent in the areas of community and population health management

41% indicated a lack of experience in change management and transformational change

37% noted a deficit in advanced financial expertise

34% said their management staff lacked key skills in innovation and creativity

29% pointed to a shortfall in data analytics experience

In the AHA report (link below), healthcare organizations indicated they were actively working to close these talent gaps in a variety of ways. Many organizations said they planned to address these deficits “through the addition of new executive team positions to lead and galvanize support for initiatives in top strategic areas.” Evidence of this trend was noted in the report, which stated that “60 percent of survey respondents said the senior management team of their organization is larger today than it was three years ago.”

Other topics addressed in this informative report include:

Challenges to Achieving Strategic Priorities
New Leadership Roles, New Capabilities: The Emerging Health Care Organization
Traditional Roles Evolving
Broad Leadership Skills Needed
Overcoming Organizational Barriers
Building the Leadership Team for the Future Health Care Organization
Evaluating Board Composition

To learn more, the report can be accessed via the AHA website at: http://www.hpoe.org/Reports-HPOE/leadership-team-future-2014.pdf
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At its annual conference held May 15-17 in Chicago, Becker's Hospital Review sponsored a presentation by three healthcare executives on the key attributes of successful health systems. The panel was moderated by Chuck Lauer, previous publisher of Modern Healthcare.

During the discussion, four essential themes emerged as the leading attributes of great health systems:

1. Crystal clear visions and missions.
2. Engaged, energetic leaders who are comfortable with ambiguity.
3. Having a “wide lens” when defining who they serve.
4. Board members and executives who aren't hospital-centric.

On the topic of leadership, the panel pointed to the need for executives to perceive difficult challenges as opportunities for growth and innovation. Raising the issue of “old school” versus “new school” ways of approaching problems, Deborah Proctor, president and CEO of St. Joseph Health in Irvine, California, and chairperson of the Catholic Health Association, remarked that today’s leaders need to “live in ambiguity and live in it comfortably.”

For more information on the key points raised in this panel discussion, visit: http://www.beckershospitalreview.com/leadership-management/4-signs-of-great-health-systems.html
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Executives of hospitals and health systems need an effective strategy when moving from volume-based to value-based business models. To help you develop the right strategy for your organization, the American Hospital Association (AHA) has published an informative 40-page report (link below). In the report, five strategic approaches to transformation are described along with ten “guiding questions” to consider.

Last week at the AHA’s annual meeting in Washington DC, a key presentation featured panelists who discussed their different approaches to implementing value-based models. Executives from WellPoint, Billings Clinic, and Presbyterian Healthcare Services in New Mexico shared their strategies.

The three facets of the presentation showed how each organization took a different path to success: CareMore, a division within WellPoint, developed greater specialization in a market niche; Glendive Medical Center, a previously independent facility in Montana, chose to affiliate with Billings; and Presbyterian of New Mexico redefined its operations by starting a health plan that covers 435,000 members and includes 600 healthcare providers.

Jason Barker, President at CareMore, discussed solidifying its position in a niche market by focusing entirely on caring for patients who are older and frailer. Their keys to success involved accuracy in predictive modeling and earlier interventions with patients.

Scott Duke, VP of regional operations at Billings and former CEO of Glendive, talked about affiliations and emphasized several key factors when evaluating a partnership: alignment of missions, values and care models; strategic planning that involves extensive research; and consistent communications with stakeholders.

Jim Hinton, President and CEO of Presbyterian Healthcare Services, cited several critical success factors for health systems and care coordination programs: effective collaboration among all entities; aligned financial incentives; rapid cycle improvements; and clinical leadership.

You can access the AHA report on moving toward value-based models in the “Resources” section at: http://www.aha.org/research/cor/paths/index.shtml
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Last week Texas Health Resources set a good example of how to use strategic communications as a means to differentiate itself within the environment of healthcare reform. Texas Health Resources is a not-for-profit health system comprised of 26 hospitals, 58 outpatient facilities, and 560 MDs in a physicians group.

In an April 30 press release titled “Texas Health Advances Transparency and Accountability with Public Quality and Safety Report,” the health system released a series of reports comparing their numbers with cumulative data aggregated across other hospitals in Texas and the U.S. The CEO of Texas Health Resources, Doug Hawthorne, stated, “We are stepping out ahead of every other health system in North Texas and ahead of most other systems across the nation.”

Proactive communications are going to play an increasingly vital role over the coming years as data about the quality of care becomes more visible to healthcare consumers. For example, at the CMS “Hospital Compare” website (link below), consumers can compare their local hospitals’ performance in areas such as:

● Consumer experiences at the hospitals
● Timeliness of care in areas such as heart attack, surgeries and preventive care
● Unplanned readmissions and death rates
● Use of medical imaging
● Medicare spending per beneficiary

Hospitals and health systems that proactively position their performance data will gain competitive advantages in the markets they serve, and the key to success in that effort is strategic communications. CEOs and other executives will need to develop and implement a communications plan to position their data in the most favorable light. The “silver lining” here is that no single hospital or health system will be dominant across a majority of data points, which presents opportunities to competitively position and promote your hospital’s greatest areas of performance.

To view how Texas Health positioned its data and to review the current data points available at “Hospital Compare,” see the web resources below.

Texas Health Resources Quality Reports:

CMS “Hospital Compare” Website:
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This week the Wall Street Journal published a special report titled, “Inside the Executive Brain.” The material addresses topics such as how executives approach the decision-making process.

For example, how do the most effective leaders make the best decisions? While it’s important to gather the facts and logically analyze relevant data, it’s also critical to incorporate your intuition, which itself is based on your cumulative years of experience.

There are two key components to decision making: 1) analytical thinking and 2) social thinking – and social thinking is more important than you may assume.

The difference between an “average leader” and an “exceptional leader” is often determined by the ability to view a problem from multiple perspectives, which involves not only getting input from key stakeholders, but also thinking about how a wide variety of people will respond to your decision.

A dilemma for those in leadership positions is that individuals are often predisposed to applying either analytical thinking or social thinking when making decisions. However, the key to success is cultivating skills in both areas.

Another key element of effective leadership is the ability to inspire people. The key here is to stay positive (use the carrot, not the stick); the most effective leaders inspire people with encouragement and positive praise.

Related to successful inspiration is the ability to articulate a vision. Ideally, you want your people to be able to clearly see the big picture of where the decision is taking them and where the organization is going. This is critical to getting people to buy into your strategy.

This special report from WSJ includes several articles by experts on topics such as the “Four Qualities of Successful Executives” (decisiveness, confidence, flexibility and humility), and “Why Successful Executives Should be Coaches, Not Generals.”

You can access the information at: http://online.wsj.com/news/articles/SB10001424052702303725404579461722158151180
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As a representative example of nationwide developments, Community Memorial Healthcenter (CMH) in South Hill, Virginia, is merging with a large partner, Virginia Commonwealth University Health System. The merger, which was announced earlier this month, reflects a growing trend.

Prior to this year, CMH managed to operate for 60 years without a budget deficit in all but one of those years. When the hospital releases numbers for its current fiscal year which ends June 30, the CEO, W. Scott Burnette, is quoted as saying, “It’s not going to be pretty.”

Burnette’s sentiments and comments by other executives and analysts are included in an article published in the April 20 edition of the Richmond Times-Dispatch. A link to the article is provided below.

As noted in the article, the key factors driving consolidation for smaller community hospitals include the following:

1) The hospitals need access to capital to survive
2) Economies of scale are needed to control costs
3) The complexity of government regulations are straining resources
4) Technology requirements are growing in complexity
5) Hospitals are increasingly accountable for the quality of healthcare services
6) Business models are shifting from fee-based to value-based

In a report released by Standard & Poor’s at the end of 2013, the outlook for non-profit healthcare providers was downgraded from “stable” to “negative.” According to the report, “the sector is finally at the tipping point – where an increasing number of organizations will find themselves weighed down by issues that outstrip their ability to implement sufficiently robust positive countermeasures.”

To learn more about these and other issues influencing mergers and acquisitions, including key factors related to Medicare, Medicaid and the Affordable Care Act, see the Richmond Times-Dispatch article at:
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In a report released April 10, consulting firm Kaufman Hall indicated that M&A activity among hospitals and health systems continues to increase. During 2013, there were 98 mergers and acquisitions, up three percent over 2012, but up 51% compared to 2010. In their analysis, Kaufman Hall stated, “The level of activity shows consolidation continuing to occur among not-for-profit hospitals and health systems as they position themselves for value-based payment and population health management.”

The numbers are even more substantial when taking into consideration other healthcare entities such as physician groups, labs, MRI, dialysis, home health, behavioral health and hospice. The most recent figures available indicate that there were 267 mergers and acquisitions during the third quarter of 2013 alone. That was an increase of 16% over the second quarter of 2013, and a 35% increase compared to the third quarter of 2012. Those numbers were reported by Irving Levin Associates, a business intelligence firm that specializes in healthcare finance.

Commenting on the data released by Irving Levin, Lisa Phillips, editor of Health Care M&A News, said, “Health systems that have made strategic acquisitions such as physician medical groups will now turn their attention to long-term care, home health care and rehabilitation to fill out their care continuum requirements. We still expect a fluid market in physician medical groups and continued consolidation among hospitals.”

Ernst & Young’s senior managing director for U.S. healthcare mergers and acquisitions, Gregory Park, indicated last month that the Affordable Care Act was causing a “tectonic shift” in hospital operations. Michael Finnerty, Managing Director at Kaufman Hall, commented, “Our analysis confirms that hospitals and health systems are continuing to pursue partnership arrangements as one approach to accessing the enhanced infrastructure necessary to provide care successfully in the changing environment.”

This changing landscape in our industry presents unique opportunities for healthcare executives to differentiate themselves among their peers. There’s no better time than now to evaluate how you can position your leadership skills and accomplishments to take advantage of the transformation that’s occurring in the healthcare industry.
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Numerous firms are in the business of ranking hospitals (U.S. News & World Report, Healthgrades, Truven Health Analytics, LeapFrog Group, American Nurses Credentialing Center, etc.). Recently, Becker’s Hospital Review analyzed all of these sources and other data to develop its annual list of “100 Great Hospitals in America.”

Becker’s data isn’t a ranking – it presents a list of 100 hospitals in alphabetical order. The value of this list is that it identifies key trends and activities that executives can use to improve the position of their hospitals in today’s rapidly changing landscape. If you’re in a career transition phase, you can use this information to acquire valuable knowledge and help differentiate yourself among your peers.

The information is an “easy read” – just three paragraphs per hospital – so you can scan through the list, review some of the data, and perhaps gain some inspiration about how you can evolve your hospital’s clinical and business practices to increase performance in one or more areas.

Becker’s report also serves as a reminder of the importance of communicating the accomplishments of your hospital. No matter how great a job you’re doing, if you don’t get the word out there – both to your community and to your internal personnel – you increase the risk of placing your hospital at a competitive disadvantage. If you haven’t yet implemented or strengthened your hospital’s strategic communication plan, it’s important to begin to evaluate how proactive communications can:

(1) Improve the perception of your hospital by industry analysts and the board
(2) Improve awareness of the value and quality of your hospital within the community
(3) Improve the alignment of your staff with clinical and business goals

To view Becker’s data on “100 Great Hospitals” and discover how they’re differentiating themselves, you can access the report at:
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In a recent study conducted by L.E.K. Consulting, approximately 150 hospital CEOs and other senior decision makers were asked how they expected to respond to the Affordable Care Act. Their answers indicated they were planning to implement the following strategies:

69 percent – Increase process efficiency
51 percent – Reduce costs by renegotiating with suppliers
45 percent – Reduce redundant procedures in care
45 percent – Delay capital expenditures
35 percent – Increase utilization
30 percent – Lower costs at care centers
18 percent – Delay acquisitions
05 percent – Do nothing

Other findings noted in the four-page “Executive Insights” report (link below) include:

"Typical suburban hospital’s margins are currently approximately 4% but this is expected to decline to 0%, primarily due to payer-mix shifts.”

"The top 100 hospital systems in the U.S. will account for more than 60% of hospital spending, up from 40% in 2008.”

“While most hospitals still operate as standalone institutions, the majority will likely eventually move towards joining large, consolidated, and increasingly strategically integrated systems.”

The concise report also includes data on the percentage of respondents indicating their interest in specific medical technology solutions to address issues such as disease management, hospital management, clinical analytics, etc.

L.E.K. Consulting is a 30-year-old management consulting firm with clients in the private and public sectors. You can access their report at: http://www.lek.com/sites/default/files/LEK_HospitalSurveyEI0214_Final%28v4%29.pdf
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At the ACHE “Congress on Healthcare Leadership” this week, a key presentation discussed the issues surrounding increased scrutiny of executive compensation. The presenters, F. Kenneth Ackerman Jr. and David A. Bjork, chairman and senior vice president at Integrated Health Strategies, stressed the growing importance of establishing a compensation committee to improve governance. The speakers referred to a report (link below), issued by the Alliance for Advancing Nonprofit Health Care, which helps healthcare executives answer a simple question: “Among all of the 50–100 ‘best practices’ that permeate the literature, which are the ones that are likely to make the most difference in achieving excellence in governance?”

In the concise report, titled “Great Governance,” the authors provide recommendations on how to establish and improve compensation committees and other governance practices. Seven benchmarks are listed in the report, along with “key action steps” to consider when addressing the benchmarks.

Appendices in the report provide checklists to evaluate board meeting practices and other governance activities. It’s a great document that will help CEOs and other executives address hospital compensation plans. The proactive planning discussed in the report will also help executives respond to challenges from board members as well as from the media regarding executive compensation.

The bottom line is that it’s important to educate board members before questions arise—and by strengthening the compensation committee, the board will help protect the hospital, the CEO and the board itself.

You can access the “Great Governance” report at http://www.integratedhealthcarestrategies.com/documents/articles/378.pdf
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According to a 2013 survey co-sponsored by the American Society for Healthcare Human Resources Administration, CEOs of independent health systems earned a median salary of $750,000, while CEOs at subsidiary health systems earned a median figure of $539,000. CFOs at hospitals and health systems earned median compensation that ranged from about $200,000 at subsidiary hospitals to about $400,000 at independent systems. Median salaries for COOs at health systems ranged from approximately $350,000 to $450,000 depending on the type of ownership. At independent and subsidiary hospitals, COO compensation averaged about $300,000.

This data and additional details are found in an article published by Becker’s Hospital Review (link below). The article also discusses five trends in hospital executive compensation to watch in 2014:

1. Expect modest increases, generally between two percent and four percent.

2. Nonprofit hospital executives need to address the public perception that compensation is not tied to healthcare quality.

3. Compensation plans will be more closely linked to value-based outcomes and physician engagement and alignment.

4. Advocacy groups are pushing hospitals to align compensation with attaining goals.

5. Hospital executives who are physicians are in high demand and receiving greater pay increases.

The bottom line is that there are new factors coming into play with hospital executive compensation – and the more you know, the better you will be able to navigate the changing landscape. To see the article in Becker's Hospital Review, visit
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In a March 10 press release, ACHE reported that CEO turnover occurred at one out of every five hospitals in the US during 2013. The 20% figure is the highest turnover rate recorded by ACHE since they started reporting the annual data in 1981. For 2013, ACHE reported 4,546 total hospitals in the US, which included general medical, short-term and non-federal hospitals.

President and CEO of ACHE, Deborah J. Bowen, said, “The increase in the turnover rate may be indicative of a combination of factors, including an increased number of baby boomers seeking retirement, the emerging trend toward consolidation in our industry and the complexity and amount of change going on in healthcare today.”

On its website (link below), ACHE provides a state-by-state list showing the percent of CEO turnover. States are ranked by high-turnover, medium turnover, and low-turnover. Among states with the highest turnover rates are Oklahoma (33%), Arkansas (30%), Virginia (29%), Florida (27%) and Louisiana (27%). States with the lowest rates include New Jersey (10%), Oregon (13%), Pennsylvania (14%), Wisconsin (14%) and Minnesota (15%).

In 2013, Black Book Market Research reported that the average tenure of a hospital CEO is less than 3.5 years, and that involuntary termination accounted for 56% of that turnover. Other findings reported by Black Book include the following:

A) 87% of Chief Medical Officers are replaced within two months after a change in CEO.

B) 94% of new CEOs who come into their position without extensive hospital experience say they don’t think healthcare expertise is needed when replacing other senior executives during an overhaul of management staff.

C) 89% of board members involved in hiring an “outsider” indicate that “broad business operational expertise and singular vision pays off with fresh perspectives on efficiencies, value, cost savings, and the goodwill to the community.”

Commenting on the accelerated rate of hospital CEO turnover, Ms. Bowen remarked, “The increase in the rate reinforces the need for healthcare leaders to work with their boards to ensure appropriate succession plans are in place.”

The complete list of state-by-state CEO turnover rates is available at:
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