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The Rise of Hospital Government Relations: How Does Your Organization Stack Up?

by Magi Curtis | November 2015

During the past decade, government relations programs at high-performing healthcare organizations have evolved dramatically. What once was considered by some to be a secondary function is now recognized as fundamentally important to achieving a health system’s strategic business goals.

The healthcare industry has undergone unprecedented transformation in the last few years—and continues changing daily. Through that perfect storm of change has emerged a rising role for government relations strategists in healthcare organizations, and the importance of this role will only continue to grow.

Genesis of the New Role for Government Relations

Not least among the factors driving this change is the Affordable Care Act (ACA). With the ACA, hospitals and health systems are held to new standards of accountability for quality and cost of care—all while dealing with staggering reimbursement cuts and tighter government regulation. The ACA’s sweeping reforms mean it has never been more important for hospital and health system leaders to establish a consistent, effective dialogue with elected officials and regulators.

Healthcare leaders also must recognize that regulators and governing bodies at the local, state, and federal levels determine the rules and regulations through which their organizations operate. In today’s climate, those regulators and governing bodies have an increasing role in how healthcare organizations grow. That means the FTC is taking a closer look at provider consolidation nationwide, state Certificate of Need boards are paying more attention to the construction of new facilities, and states’ legislatures are choosing to expand (or not expand) Medicaid coverage—which is directly tied to a provider’s bottom line and financial viability—while facing political pressures of their own and struggling to rein in their budgets.

Another factor in the increasing importance of government relations is that healthcare providers are becoming more and more dependent on the government—at the federal and state level—as a payer. In fact, between 1990 and 2010, national Medicaid spending increased from $72 billion to more than $400 billion annually, and Medicare is showing the same trend. The Congressional Budget Office projects Medicare costs will total more than $1 trillion by 2020. This will only increase as healthcare reform implementation occurs and the industry continues to evolve.

Trends at High-Performing Systems

Thirty years ago, many hospitals and health systems had government relations staff, but it wasn’t shocking if they didn’t. Twenty years ago, more hospitals and health systems were investing in government relations efforts, but the focus was different; it was centered more exclusively on legislative and regulatory goals. In the last two decades, the industry has evolved and the overall focus of the government relations department is centered on helping a hospital or health system achieve its strategic business goals. It’s a critical component of an organization’s overall success.

Last year, our firm embarked on a benchmark project that provides data on how hospitals and health systems across the nation are structuring and investing in their government relations efforts. A couple of key findings from the report stand out.

Government relations leaders are seasoned professionals. Nearly 90 percent of all respondents reported having worked in the government relations industry for eight to 15 years and over 60 percent for over 15 years (see Exhibit 1). What this says to me is that individuals leading the government relations efforts at our nation’s hospitals and health systems are true experts in their fields.

Not only do they need to be on top of the latest legislative and regulatory issues that could impact their organization, but they also need to be familiar with and help their organization achieve success in growth strategies, clinically integrated networks and ACO development, payment reform, network- and state-based exchange plan and demonstration project inclusion, labor efforts, and of course, reputation building. Only a government relations strategist can juggle and drive change on all of these issues.

Boards and CEOs must recognize the value of government relations, invest in it, and position its leader appropriately. Just like you value your leaders in operations, finance, clinical staff, legal, strategy, and more, the government relations leader should have a seat at the executive table and be a part of overall business strategy development for the entire organization. High-performing organizations recognize this and position their government relations leaders accordingly, many by having them report directly to the CEO. They also invest in the overall department efforts wisely.

The board and C-suite have a role to play. The relationship cultivation necessary for successful government relations efforts cannot be accomplished by the government relations team alone. Hospitals and health systems with the most effective government relations programs engage board members and C-suite leaders in these efforts as well (see Exhibit 2 on the following page).

Measuring ROI for the government relations department is essential. Clearly, the role of the government relations leader and his or her team is a job for a small army, but hospital and health systems’ budgets are tight—and only getting tighter. Government relations leaders have a responsibility to figure out how to measure the ROI for their departments. Yes, measuring ROI for government relations may be more challenging than it is for finance or clinical efforts, but there are ways, and government relations leaders must prove the bottom line value of their efforts. It will likely be the lynchpin to the CEO and board approving increased department resources in the future.

The Need Is Clear—But Is It?

Given all of this, it would seem obvious that government relations as a function is critical to achieving a health system’s strategic goals. But for boards and CEOs, knowing that something is important and being willing to invest in it—during financially lean times—can be a different story. It’s important that leaders not just invest in it, but that they give government relations the authority it needs and that they measure the program. Just as a hospital or health system’s operations and growth strategies look very different today than they did in 2000, the government relations programs should also be reshaped to reflect the realities of the time.

Assessing Your Government Relations Efforts

The key to government relations success is having a well-developed program in place long before your organization needs anything.

Below are five questions the board and CEO should discuss when looking at the organization’s government relations efforts:
1.  Are we achieving our strategic goals?
2.  Does our government relations leader have a seat at our senior leadership table?
3.  Are we investing enough into our government relations efforts?
4.  Do we know how our government relations efforts stack up against those of our peers and competitors?
5.  How will we know if our government relations efforts are successful?

Unless healthcare leaders can confidently answer “yes”—and can articulate how—to each of the above questions, I encourage them to assess how their hospital or health system approaches, invests in, and manages its government relations efforts.

Via The Governance Institute’s E-Briefings »

 

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