Daily Update

Keynote Speaker Ian Morrison Identifies Critical Competencies for Hospital Leaders

Changes in the way hospitals are paid and the structure of the healthcare delivery system will increase the importance of healthcare finance professionals in the next decade, says Ian Morrison, author of the book “Healthcare in the New Millennium,” consultant, futurist, and a keynote speaker at this year’s ANI: The Healthcare Finance Conference.  HFMA recently spoke with Morrison for a preview of his ANI presentation.

Ian Morrison

Q: HFMA has written extensively about the competencies hospital leaders need for success under payment reform, including ability to integrate with physicians, cost services, and manage risk. What do you see as the most important steps hospitals should take to succeed as the approach to payment changes?

A: Those three competencies are very important. Let’s use bundled payment as an example. The first step in bundled payment is to combine the fee for the physician services—let’s say for a surgical procedure—with the hospitalization costs. Integrating with physicians will be paramount in this, because physicians’ orders account for most of the expenditure in a hospital and in health care, generally.

Integration can take place in lots of different ways, from owning those physicians’ practices—or making them salaried employees effectively—to having alignment of incentives, contracting, and so forth. Because of the uncertainties of healthcare reform, many physicians are reaching out to hospitals to say, “Bring me on board.” For many reasons, integration is going on across American health care, and hospitals are on the receiving end of requests as well as aggressively going after physicians to integrate them more formally into their services.

The second competency that HFMA raises is the whole cost management issue. Hospitals will have to learn how to make money on Medicare in the long run. Most of them don’t. Very few hospital executives would be capable of running their hospital profitably if they were reimbursed on a Medicare basis. That is the reason the early versions of the Senate and House healthcare reform bills—which had a public option using Medicare rates as the method and level of payment (even if it was Medicare plus 10 percent)—caused the hospital industry to shudder. But leaders in American health care and in the hospital business are preparing their institutions to manage costs to the point where they would be able to survive on Medicare rates. It is not their preference, but they believe that those rates may become the default payment level and that they must adjust their cost of services accordingly.

Managing risk is another important competency. The expansion of what the hospital is going to be responsible for from a risk point of view is going to be quite remarkable, because accountable care organizations—if that’s the framework in which all of these payment reforms are going to be laid out—are the right frame for it. Not just integrated care, but accountable care, because we’re integrating for a purpose, which is to create accountability and higher performance and higher quality. Embedded in that is the notion that accountability across the continuum of care and across time means that hospitals are going to be managing risk more than they have in the past, as are other providers, such as large multispecialty practices, which are also going to be creating accountable care organizations. But those providers are going to be in the minority, because fewer large physician groups are capable of creating accountable care organizations.

Speed, agility, flexibility, and experimentation are also key competencies hospitals need to develop in this changing environment. Those institutions that are capable and positioned to pilot these models and learn rapidly how to respond under these circumstances are going to have a huge advantage.

For example, a number of hospitals I work with across the country have their own health plan, which often is a legacy of failed attempts at vertical integration from the 1990s. The hospitals bought a health plan because they thought they were going to be capitated. Then many hospitals collapsed or got rid of the plans. But many still get significant patient flow from those plans. They are well-positioned to run some experiments inside that closed-loop framework to learn about how to make money and manage in the environment.

Q: How will the role of healthcare finance change in the next decade?

A: Hospital finance executives are going to become even more important in the next decade because of the pressures hospitals are going to be under from a reimbursement point of view—not only because Medicare is likely to be constrained in terms of its reimbursement, but also because of these other changes in the method of reimbursement that are going to take place. There will be a lot of action in the way in which hospitals are paid. And quite frankly, there is going to be an enormous juggling act over the next decade in trying to keep hospitals in the black, profitable, as we go through these changes.

The ascendancy of hospital CFOs in terms of importance in hospital management has been clear over the past 20 years, but certainly the next decade is going to be absolutely crucial. CFOs will have to work much more closely with medical staff and chief medical officers in thinking through how care can be transformed. For the next decade, I would envision a robust integration within the hospital of both medical management and the financial management processes, because otherwise hospitals are not going to make it.

Morrison will present “The Future of the Healthcare Marketplace” at ANI: The Healthcare Finance Conference on Sunday, June 20, from 5:00 – 6:00 p.m.