Not everyone involved in not-for-profit healthcare is suffering because of the Balanced Budget Act of 1997. Quite the contrary, the turnaround firms and the turnaround arms of the big accounting and consulting companies are experiencing "gold rush" fever.
The University of Illinois at Chicago Medical Center, UCSF Stanford Health Care and Detroit Medical Center are a few of the newsworthy examples of healthcare institutions or systems that have resorted to turnaround firms for survival. Unfortunately, there are literally hundreds of lesser-known organizations that have felt compelled to take the same route.
How does this happen? Why do so many healthcare boards, management teams and physician leaders come to see a turnaround firm as the only answer? Is the degree and pace of change in the industry so disruptive that management is simply unable to keep up? Or does healthcare have a disproportionately high number of incompetent executive teams?
I recently had an experience that is instructive on this issue. At the outset of a strategic planning session I was facilitating for a hospital that was barely breaking even on operations, I asked the senior management team to pretend that they were a group of consultants from one of the well-known turnaround firms. I gave them one hour to apply what they knew about their own organization and prepare a set of preliminary recommendations for the board of trustees on how to improve the hospital's operational and financial results.
To the surprise of most of the management group, they produced recommendations that would, conservatively, result in almost a two-percentage-point gain on the bottom line and would simultaneously improve customer satisfaction. The group concluded that assuming the role of the turnaround firm freed them up to apply their knowledge unfettered from the organization's norms and politics. They learned a simple but powerful lesson: Knowing where the gold is and mining it are two very different things.
A shortage of courage. Most health system leadership teams are like the group in the planning session I described. They know where the gold is but are unwilling to take advantage of their knowledge. In my opinion, the biggest obstacle to bringing about productive change is a lack of courage.
Management is often performing a high-wire act keeping the board, physicians and general community satisfied with its performance. Strategies and tactics that could produce significant gains for the organization often are not pursued for fear that physicians will "go to war" over the change (such as clinical service consolidation and renegotiated contracts) or key board leaders will not accept bold initiatives designed to integrate the governance and operations of the health system (such as eliminating boards or closing a facility).
Physician leaders, fearful of alienating their medical colleagues and, in some cases, referral sources, often are timid about pushing for change that could greatly benefit the organization (care management implementation, productivity initiatives, etc.).
Courage anemia results in management by inertia, which inhibits action and innovation. When matters reach the crisis stage, a turnaround firm seems like the only answer. A cynic might argue that hiring a turnaround firm to do their dirty work gives leadership the political cover needed to make bold changes. In effect, the consultants can take the blame for the unpopular decisions that are made in the name of survival. This may be true in some cases, but it still doesn't explain why the organization's leaders allow things to get to the crisis stage in the first place.
People in most organizations resist change and cling to the status quo. Why? Because change can result in failure, and it's the fear of failure that generates resistance. In healthcare, this phenomenon manifests itself in numerous ways. Examples include:
Rearview-mirror thinking. Leaders engaged in this behavior are unable to accept the fact that market-based competition has become our nation's de facto healthcare reform policy. Closing facilities, consolidating services and creating a brand image based on quality and customer service have become survival imperatives. Instead of looking forward, taking charge and making bold, strategic moves, leadership is more comfortable taking conservative baby steps, which only result in missed opportunities.
Following the herd. This is another fear-of-failure response. If a strategy is reported on in enough of the healthcare journals, it must be safe and worth pursuing. The latest example of this is the drive toward "disintegration" among healthcare systems. After several highly publicized failed mergers hit the pages of MODERN HEALTHCARE, boards and management began buzzing about whether or not the "integrated system" concept is a viable strategy today. This "lemming effect" can lead to systems pursuing ill-advised strategies.
A siege mentality. Sadly, many senior management teams have become battle-weary and have adopted a siege mentality when it comes to dealing with key stakeholders. Withholding information from the board, becoming isolated and unresponsive to physicians and cutting corners are actions often associated with the fear-of-failure response. A senior team in this state is unlikely to be innovative or provide the leadership courage needed for change.
How do healthcare leaders break out of this downward spiral? The board, management and physician leadership must fight the problem together and turn the question "Why wait until a turnaround firm is needed?" into an organization-wide challenge. Chances are the knowledge and skills required to achieve financial and operational health already exist within the organization. Leadership must take charge, demonstrate the courage to make tough decisions and drive out fear in the process. In healthy organizations, the only unforgivable failure is the failure to act.
Edward Kazemek is chief executive officer of Accord Limited, a Chicago-based healthcare consulting firm specializing in organizational change.