We believe that if you want to understand what a hospital's primary mission truly is—financial performance or quality patient care—you should skip the mission statement and go directly to the CEO's contract. While these two goals aren't mutually exclusive, whatever the board really wants the hospital to achieve will be expressed as a significant incentive clause in the top executive's employment agreement. And, even more importantly, only when it makes it into the CEO's contract will it cascade into the performance goals of all those in the organization who are charged with turning those goals into reality.
That is why we were pleased to read Melanie Evans' recent cover story (“Bonuses still tied to better financials”) highlighting the increasing use of incentives to achieve quality targets in executive compensation. The alignment of incentives with organizational quality benchmarks is critical for success. It can only be a good thing for patients if everyone in the hospital, from the C-suite on down to front-line workers and physicians, understand all the quality imperatives embedded in Medicare reimbursement policies and, increasingly, those of private insurers.
We were especially encouraged by the quote from Herb Vallier, chief human resources officer at Ascension Health: “Finance would not be weighted any more than quality” when calculating executive bonuses. The most significant remaining hurdle to high performance is that hospital management and physicians do not yet have a working knowledge of the complex quality benchmarks that affect reimbursement. If hospital leaders want to sustain operating margins during this period of decreasing demand for inpatient services, they need an engaged organization that understands the quality benchmarks and how they link to higher payer reimbursement.