We cannot give to the poor if we are one of them." Such has become the mantra for healthcare systems across the country that have perpetually given a sizable portion of their resources to provide for the poor and the underserved.
The most recent data, from 1998, from the Pennsylvania Healthcare Cost Containment Council joint venture of government and business, included these statistics: 67% of hospitals cannot cover their operating costs with patient revenues; 54% of hospitals operate with net margins below what is sufficient to sustain financial viability over the long term; Balanced Budget Act of 1997 reductions in revenues over the next two years will remove more money from Medicare payments than all hospitals in the state now earn annually in net income; and Medicare and Medicaid account for 55% of hospital revenues. Pinpointing the main culprit behind the statistics is akin to deciding which Robert Frost stanza is the most harmonic.
Managed care, which has generated radical change in a short time in newer markets, is one problem. In the past five years HMO penetration in the Pennsylvania market, for instance, increased from 10% to almost 50%. And the state has experienced a dramatic rise in the uninsured population-to 1.2 million people in 1997. Hospital uncompensated care statewide for 1997 was $751 million.
In all likelihood, more than a third of the healthcare systems will face bankruptcies and consolidations in the coming years, which has enormous economic implications when health systems are the major employers in their communities.
What's a healthcare system to do? The only real choice is to dive in, embrace the change and aggressively take actions necessary to move through the change. To succeed, systems must pursue six core strategies, which are a package deal. Pull one out, and the package unravels. The strategies are:
Re-establish trust with key stakeholders. Health systems must visibly educate patients and the communities we serve about the changes we face and nurture their direct and active involvement in the solutions. These problems can be addressed only with widespread and active community participation. Health systems can seek community participation on issue-specific task forces-for example, on the uninsured problem, senior health, women's health or the health system's economic impact on the community.
Membership should include community representatives beyond health system board members. Linkage with and integration into the community-schools, congregations and agencies-will also increase trust. But in the long run, the most effective means to achieving trust is to perform consistently and solidly in providing quality care and stewardship of resources.
Engage every employee in the solution. Investment in training, education and human resource development is a core strategy. It requires healthcare systems to commit to clearly identified resources, even in tough times.
Make an extraordinary commitment to innovation. Jump into areas of expertise that are foreign to traditional healthcare system management. Case management, claims management, complementary medicine, disease management, health risk assessments, pharmacy management, physician practice management and prevention are terms blanketing the literature today. But few systems have mastered these areas. Our systems must apply biotechnology and develop new technologies if our stakeholders are to recognize us as serious players in solving healthcare problems.
Develop the ability to coordinate care across the continuum. That occurs best when systems are linked to physician networks with strong physician governance, management and ownership. Healthcare organizations must share growth with physicians through risk-sharing contracts and joint ownership of services.
Return to basics in operations management. All serious players must meet the standards in costs, productivity and quality that the top 10% of systems nationwide have achieved. At Mercy Health Partners, we have dismantled the bureaucracy and created strong multidisciplinary teams to address cash management, clinical management, information technology management, labor productivity, lengths of stay, and more. These teams draw on expertise from across the continuum of care in a constant attempt to improve performance.
Achieve a certain critical mass and geographic reach to effectively achieve the first five strategies. Market share and access to capital are givens to establish a reasonable probability of success. Achieving critical mass means actively seeking partnerships, joint ventures and mergers where necessary.
The age of consumerism in healthcare has arrived. Consumers have access to once unobtainable health information through the Internet and other sources. They come to their physicians with options in hand. Patients will join payers in forcing providers to achieve radical improvements in all aspects of wellness, health management and healthcare delivery and financing. Those that don't meet the challenge will fail. Those that succeed will have a dramatic impact on the well-being and quality of the communities they serve.
John Nespoli is president and chief executive officer of Mercy Health Partners in Scranton, Pa.