As 2000 turns into 2001, a familiar story permeates the issue of healthcare governance: Organizations face more demands while operating with seemingly fewer dollars. In other words, hospital trustees will continue to look closely at the bottom line, and hospital executives may have to watch their backs.
"Boards will continue to keep their eyes on the money issues, the flow of funds from the federal government, and quality issues," says Charles Ewell, chairman of the Governance Institute, a La Jolla, Calif.-based consulting firm.
According to Ewell, healthcare boards will be examining those issues because there isn't much else they can control. A combination of cuts in reimbursement from Medicare -- despite some congressional relief -- combined with HMOs ratcheting down on payments means hospitals have lost virtually all pricing leverage. "Consequently, all the talk is on the expense side," he says.
One of those major expenses is insurance, particularly liability coverage for hospitals, doctors, and directors and officers. "The insurance industry looks at quality of care as a factor for determining premiums," Ewell says. Add to that the recent focus on controlling medical errors, and hospital staffs find themselves under pressure to improve their performance.
Conversely, medical staffs are lobbying boards for more funds to meet the demands, Ewell says. "The continuing relationships between (boards) and physicians is under pressure due to the demands that the former fulfill the latter's clinical and personnel requirements. It's the board's job to match up reality with economics, realizing that the doctors are their partners in a general sense, and trying to keep them reasonably happy," he says.
And if medical staffs aren't happy, it's the front-line executives who often find themselves between a rock and a hard place. Ewell would not be surprised if there were more ousters similar to the one that occurred last May of San Diego-based Scripps Health Chief Executive Officer Stanley Pappelbaum, M.D. Pappelbaum was forced to resign in part because of dissatisfaction among Scripps Health's 2,400 physicians, even though the system was profitable. Scripps Health physicians were unhappy about Pappelbaum's cost-cutting initiatives.
Meanwhile, recruitment of trustees with more financial expertise and fewer immediate ties to the community will make it even harder on hospital executives.
"Management is being held to a higher standard of performance by boards. The griddle continues to heat up," Ewell says.