Skip to main content
Category

High Stakes

In Change Management, High Stakes, J|Insights, Strategic Positioning

Durable Optimism and the Importance of Healthcare Boards Taking Informed Risks

Orange rectangle with a white-lettered "J" in the middle, adjacent to larger text that reads "Insights" on a navy background

Change is hard and, these days, it’s compounding. Big disruptions layered with small pivots have led to a tough environment where “one more thing” is a burden, not an exciting opportunity.

In this environment, healthcare executives and hospital board members are challenged with walking a fine line – guiding their organizations through disruption while acknowledging the uncertainty, making decisions when the path forward is foggy, and processing their own exhaustion, too.

Jarrard Inc. CEO David Jarrard and McDermott Will & Emery partner Michael Peregrine – both of whom have a deep interest in helping healthcare executives and boards navigate change – sat down to talk about the situation. They first acknowledge the challenge, then provide some historical context, then offer a few ideas for getting through it all.

Here’s an overview of the conversation. Listen to the whole thing or read the transcript below.

The Challenges:

It’s natural to wonder about the point of making long-term plans when we’re experiencing constant upheaval and uncertainty, when change has worn us down, when so much is out of our control.

In healthcare this is borne out as we see increasing responsibility – and opportunity – arrive at the door of provider organizations. And, some of the forces that have been serving as accelerants of change over the past few years have grown to be more disruptive. These factors are like the lighter fluid that started a campfire in a dry forest.

The Risk:

The tendency is to focus on and do what is doable. We tend to act on what’s right in front of us. And, while that is right and necessary in a crisis, it is not sustainable long-term. Spending too much time in the short-term leads to susceptibility to competition and disruption.

The Solutions:

Read the Transcript

David Shifrin: Michael and David. So, a lot of change disruption happening these days, and it’s happening in ways that put pressure on us and on health care leaders, both personally, as well as professionally.

I guess just a few things to note, to run down the list; although this definitely isn’t comprehensive, we’ve got the Dobbs decision, which is just one of a number of significant Supreme Court decisions this term. We’ve got the great resignation and kind of the workforce reshuffling, we’re facing down the prospects of massive inflation, which continues, as well as a potential recession. We’ve got the ongoing epidemic of gun violence. We at Jarrard just put out some resources to help healthcare providers be involved in that conversation. There’s the political divide; there’s lack of trust that we’re seeing. And then, Michael, you even mentioned the shakeup in college sports recently, with schools moving between conferences as something to flag. So, there’s so much, it’s exhausting.

And so, I’ll just kick us off here and then let you both converse with each other and bounce ideas back and forth but to start with, just talk about where that overwhelming collection of change is leading us and how people are processing it, or maybe failing to process it.

[00:01:54] Michael Peregrine: I think that’s right. You mentioned the change in college football. I think that put the capstone on it for me in terms of, it’s not that people and leaders are afraid of change, per se. I think they’re, to use your word, exhausted by this pace and the profound nature of the change. Too much, too fast change to traditions on which people counted on as normality in their lives, as predictable in their lives.

And one by two by three they’re being taken away from folks. So, I think, and David, I’m interested in your view. I think it’s a question of losing faith in the ability to control events. I know that I was particularly shaken in this environment of violence. The Abe assassination was one that I put down on my list because, again, I always thought we could count on living in a global society where we were civilized nations. These things don’t happen. And that’s really,

I guess the question, David Jarrard, I have is, I’m wondering if our leaders are saying that “when will this stop?” These things that we, these guard rails of society, these guard rails of organizations, seem to be eroding. And if we can’t count on them, and David Shifrin, going to your point, what’s the use of trying? What’s the use of planning? What’s the use of looking forward? You know, we talk about the three-year strategic plan being superseded by the five-year strategic plan, being superseded by the never-ending or ongoing strategic plan. Why even engage in strategic planning, if we’re just getting pummeled on a daily basis with things that we’ve counted on being obliterated? David, what’s your take?

[00:03:43] David Jarrard: Yeah. And in that environment, it’s the latest change that gets the greatest attention because it’s the latest change. It’s right in front of you. And everyday can begin to feel like a fire drill because you’re, as a leadership group, as a board, and even as a staff member.

I’m thinking of, of course, our hospital health system client, you run from event to event. It’s like having moved from a surgery suite, where everything is well planned and coordinated. And a good surgery, runs like a ballet. You know exactly what you’re doing, how you’re doing it to the ER, where you don’t know what’s going to come in the door next and you are running and gunning. You’re looking for supplies and trying to take care of people and keep folks alive and make it through the shift. It’s a whole different environment and way of thinking, and ER nurses and ER physicians, they have a different mindset than that orthopedic surgeon who’s been around for 30 years and knows exactly what they’re doing and how to do it.

It’s, and to your point, it’s not just the change. It’s the culmination of a whole series of changes. And it’s that sense of a lack of control where you can, you can begin to think, “what’s next? Why even act?” And I’ll add one more that we’re really paying attention to. It’s the decline of trust in organizations, in institutions. And healthcare systems continue to be very trusted organizations. And so, as other organizations become less trusted, more responsibility seems to land at the doorstep of our hospitals and health systems.

[00:05:09] Michael Peregrine: Yeah, from a leadership perspective, what troubles me is the concern that leaders for both executives and directors to pull back from engaging more fully in issues.

This is something that you, as you and I have talked, that Mitt Romney recently wrote about in the Atlantic. A concern that it’s easier to take the easiest, most simple solution to complex problems even though you have a fair likelihood of believing that it’s the wrong solution. But it’s easy, it’s quick and it’s available. Whether it’s denying that a problem exists or taking a shortcut. It’s this loss of a willingness to engage. Because again, we can’t count on traditional traditions. We can’t count on traditional guard rails to hold up. So, we’re playing short term ball. We’re making short-term decisions. We’re allocating capital on a short-term basis. We’re not planning for the future. So, when we come out of the current combination of crises that our clients are going through, will we be prepared for the next phase? Will we have prepared strategically? Will we be more susceptible to disruption and competition and regulation?

You just worry about this wearing down on our executives and our board members and it being just, when have we really hit the last straw? You’ve talked about it.

[00:06:32] David Jarrard: I agree. We, particularly, our leadership teams in healthcare systems are used to a strong sense of agency. Like driving forward and shaping the delivery of care and having some control over what happens next. And so, we are all built, particularly in healthcare, but other industries too, to do what’s doable. What can I do today that’s actually going to make a change and make a difference?

And Michael, I think you’re exactly right. Things have become so chaotic beyond our vision. That we act on those things that are right in front of us. So, we become tree people instead of forest people when we act. Which can be helpful short term; it can maybe be great in a pandemic, great in a global crisis, but not in a long-term event. It’s not a long-term solution to the crisis. That doesn’t seem to end.

[00:07:18] Michael Peregrine: And also, David, I’m concerned that if this is affecting our colleagues in the boardroom and in the C-suite, it’s got to be affecting the workforce as well. What do you say?

[00:07:28] David Jarrard: Oh, for sure. You know, our hospitals and health systems, they are not immune. they’re not an island. I mean, all the things that we experience in our communities are happening in the halls of our facilities as well. And we see it play out like position by position, job by job, in our hospitals.

And you see that in nurse staffing issues. You see it in labor activity. You see it in consumers being more and more reluctant to go spend that money, to receive the care that they should receive that would be helpful to them that will forgo longer-term health care costs. But, because they can’t see the future, they don’t know if they’re going to continue to have a job. They don’t know if they can live with continual 9% inflation that erodes their wages. They’re not seeking the care or may not seek that care in the future. Which has this cyclical effect, it reduces the revenue hospitals receive, which reduces their ability to pay nurses at a wage that is in competition with Chick-fil-A, for goodness sake. And so, it begins to build on itself into a significant issue.

[00:08:27] Michael Peregrine: And I guess the one thing that I worry about, particularly with respect to the board, is it’s trying to be a true partner in management and help lead the organization through all these very difficult times. Including the extraordinary economic issues that they’re having right now. Will board members be up to making the commitment to invest? And looking towards the future, in being an effective partner again if they are concerned that those things they knew and counted on are no longer reliable? And will there be another shoe to drop in terms of one of these change curveballs?

I particularly am concerned that what we see in the polls is about a lack of trust in democratic principles. At some point, is there a line that we’re crossing where our leaders will look to themselves saying, “after this, I know there’s really only one thing I can trust and it’s my judgment. It might not be the judgment of my collective group. My fellow executives, my colleagues on the board. I’m going to go with my gut because I know that’s not changing even though everything else around me is changing.” And that’s just antithetical to effective governance. And it is not what our industry needs at this time. And again, I’m sure you’re seeing this as well with the people you deal with in crisis management and communications.

[00:09:44] David Jarrard: That’s such a good point. Because we as a board, although the last, 20 or 24 months through the pandemic have been a very challenging time, we’ve been able to talk about the pandemic as an accelerant of change. What the pandemic has really done has made things that were already changing, just move faster.

So, telehealth, telemedicine, all the elements that are part of that new evolution of healthcare, are just occurring faster. And in some cases, that was a good thing. This strange environment gave us permission to move in the direction we wanted to go anyway. In the last year though, it’s felt like the changes have not been accelerants of change. They’ve been almost purely disruptive. And it’s impossible to anticipate. And so, the result is the bets are bigger. The risks feel higher. Because, as you say, no one has a model to predict this one outlier after another. There’s not necessarily math you can run. There’s not an analysis you can do that will give you a margin of error. So, you have to lean more on, and I love the way you say, you have to lean on your gut. What you believe to be true. And that seems to make ultimately the real job, the ultimate job of a board.

[00:10:51] Michael Peregrine: What worries me too, and has to be corrected, is the concern that the foundational principles, the core understandings of the industry, that our volunteer directors, or even our compensated directors came on board. And there were those principles or those operating guidelines, those basic understandings about the healthcare industry that they were weaned on, that they came to understand. The foundational principles and the understandings and the stipulations that underscore the strategic plan. Again, if we lose confidence in these types of factors because of the Powerful rapidity of change, we’re again, operating on an “I’m taking it one day at a time” basis. And that can be catastrophic for an organization’s future. And we, and that to me, that shift from a focus on the long-term vision to the “I just have to get through tomorrow” vision, that’s what we have to protect against.

[00:11:49] David Jarrard: And I know you work with so many boards, and I know how seriously they take the idea that they are trustees. That they are entrusted with this extraordinary organization, you know, often times hundreds of millions of dollars or multi-billion dollars of revenues and thousands of jobs. I know that weighs heavily. And so, they take seriously the ability to plan for the future and invest in the future two years, five years, 10 years out. I’m curious, as they are thinking today, how are they beyond their gut thinking about the future, sort of, envisioning about what the future is going to bring so they can plan for it?

[00:12:24] Michael Peregrine: It’s got to be a frustration again, because they contribute to a strategic vision in a variety of perspectives. They’re making bets on certain developments. And again, if they find out that they’re really unable, that change is coming too fast and too strong, their willingness to take informed risks, David, I think we’ll be limited. And that is, I keep coming back, that will be the greatest harm of this. And this is why, this kind of a miasma has to be stopped before it gets much traction.

And I was thinking about something. I saw a blip in the paper the other day. We just passed the 43rd anniversary, and I’m sure you have this on your calendar, of Jimmy Carter’s malaise speech. There’s been a lot of anniversaries this summer, with Sarbanes, with Watergate. But I thought to myself, wait a minute, as someone who waited in line for hours at the gas station during that period of time, and remembering a speech, I thought, there’s a little bit of similarity there. You had back then, as I recall, this overarching sense of an inability as a country to control our own destiny. We were no longer in charge of events, and to a certain extent, I’d be interested in your view, that seems to be where we’re headed right now with this change fatigue. We can’t stop these things from occurring. Things that we relied on are no longer reliable. We cannot control events. Do you see that as relevant at all?

[00:13:56] David Jarrard: I do say it’s very relevant. And I do remember that speech and I do remember the heckling he got afterwards. I have two thoughts about that. And the kind of communications that leaders are and could be delivering today. When I think about Carter’s comments, he wasn’t wrong to call out that this was an issue; that there’s a concern. And recognizing how the voters at the time, at least how he felt the voters at the time were feeling and thinking. I think it’s right for a leader to see the folks that they are asking to follow them. Is that recognition? I think that’s really important, and I think that’s what he was attempting to do.

But the other element of that message was there’s a problem, and I don’t know what to do about it. I’m not sure, I feel helpless, just like you. And that was, that’s the disconnect right there, that that can’t be the message leadership delivers. So, it’s great to recognize it. It’s great to call it out. It’s great to show appreciation for it and sort of shared empathy. But then, as a leader, therefore here’s what we’re going to do. Here’s how we’re going to tackle this problem. Not that I have the answers, but I know how we’re going to get into it together. I think that’s an important element for leaders today.

[00:15:07] Michael Peregrine: I agree with you. And as I thought about it, and again, I know that half of our clients have no idea what we’re talking about. But I think part of the problem, again, Carter did have his finger on the pulse. There was a crisis of American competence, and communication was what failed him. The communication of his vision failed him and ultimately failed his presidency.

And as I recall, David, this is germane to the subject of, how do we address this in the context of our clients? Somehow, he allowed the conversation on his message to shift from “we need to work together for the common good and make some self-sacrifice” to “Mr. President, you’re criticizing our way of life. You’re making moral judgments on our consumerism. You’re suggesting that we’re overly reliant on materialism and you’re blaming us for the problem.” And that, I think, as inaccurate as it was, took over the dialogue. I come back to your expertise in response to change fatigue as it may be creeping in with an organization just seems to me, not just what the message is, but how it’s delivered.

[00:16:19] David Jarrard: Yes, very much. And some of that message has to be action. So, it’s the recognition that there’s this issue. It’s acknowledging that there’s a challenge with creating a vision in such a cloudy environment. How do we see past the fog into the future? So therefore, and here’s the key, it’s always the, so therefore what? So therefore, we’re not going to cross arms and go into our boardroom and worry about the future. So therefore, we’re going to create teams. We’re going to involve you. We’re going to create a dialogue. We’re going to construct this and reconstruct it together. So even if the answer is, we’re not sure about the future, it’ll be an answer we all came to together.

So just the action of pulling people together in concert can be hugely energizing. Because then you’ve set the organization up for whatever direction you need to change. And because we will need to change, but you’ve set them up to acknowledge their own consensus building in that work. And that’s the right place for leadership right now.

[00:17:15] Michael Peregrine: Not to be Pollyannish, but I think that there’s an element where leadership here, it has as an opportunity to, through a durable optimism approach, say, “let’s take a look at what we’re dealing with right now. Maybe we can’t be, here’s where we stand in the industry. Here’s our financial position. Here are the things that are positive about this organization. Here are the tools we have to work with and here’s our position within the industry, and here’s what we do know.” And create a vision in saying that “we here at this health system are actually in a relatively stable position. These are things that you, the workforce, you, the board, us, the management team, we can count on this universe of knowns. And therefore, we are to a certain extent, maybe better than others in a position to control our destiny, even if that destiny is in the near term.”

So, I come back to your point about energy. When I’m tired, when I’m down, when I’m lazy, when I just don’t feel up to it, something energetic snaps me out of it. And I think that the energy, David, of the communication, as much as the context of the communication, is what may be necessary, in part, to counter this fatigue. The sense of loss of faith that nothing matters anymore because the future is changing every day.

[00:18:34] David Jarrard: I love the phrase durable optimism. I wrote it down as you said it. I think that’s so important to this. And to your other point, which I fully agree, and as part of our change management work is, before you can really talk about change, you have to talk about those things that aren’t changing. That will never change. This is what we know to be true.

And if you worry about all the changes that are happening, you can begin to worry that everything is going to change. That these shifts are going to change, this floor is going to change, and our mission’s going to change. And we know as an organization that short of something truly extraordinary, these things aren’t changing. This is who we are and who we’ve been for a hundred years or whatever the message is.

So, that ability to ground those things and put off the table those things that can bring some foundation and some solid ground, I think is a really important part of the message.

[00:19:30] Michael Peregrine: Don’t you think that’s a message that has to be delivered not just by the CEO, but by the linked arms of senior management and the board?

[00:19:37] David Jarrard: Yes. And the important role of the board here can be overstated to deliver that message to senior leadership. It’s the board’s commitment to this direction or these fundamentals that is key to unleashed leadership to get into this work.

[00:19:54] David Shifrin: All right. For the last couple of minutes here, let’s get very tactical. How do healthcare boards and executive teams deliver those messages? What are the tactics that are needed right now to make that connection with employees while also providing an opportunity for feedback and acknowledging the personal stress that leadership is undergoing themselves? How do you roll that in what’s the day-to-day for delivering these? Michael, I’ll start with you here.

[00:20:19] Michael Peregrine: Well, David, from my perspective, it has to start with leadership in the boardroom. And basically, the board chair and other leaders saying, “this is not a soft issue. This is a big deal. In all of our lives. We need to realize that we need to confront it, and we need to understand that for the potential risk, it is to our organization and our culture.”

So, David, I would start off by saying board leadership has to own the issue and convince the board that this is something that they must attack as a strategic concern for the organization. It’s got to start so that it’s buying in with the tone at the top. That’s job number one for me.

[00:20:57] David Jarrard: Very much so, and to affect that, is to recognize the needs of the senior leadership. And it’s, we talk about the mental health of our staff and colleagues and physicians and nurses and burnout and stress. It happens at the top, too. And as we move through dramatic things like this, recognizing that’s a need. And this group needs to be together and solid and comfortable addressing those things before they can be who they need to be within their organization.

[00:21:25] Michael Peregrine: That’s why I think that the board has to shift into high gear if it’s not already in high gear already. And begin to take a series of steps that represent a visible demonstration of their leadership and their buy-in on this issue and send that message of durable optimism. Meeting more as a board as opposed to meeting less. Having more sessions with the executive leadership team. Being visible in the institutional community. Having more town hall meetings between management and employees. A visible demonstration of board’s commitment and belief. And belief in the future and stability of the organization, not just the economic and quality and delivery of care stability, but the mission stability. As you said, David, we continue to stand for what we’ve always stood for, and you can count on that. That isn’t changing.

[00:22:21] David Jarrard: I remember years ago, during another sort of economic downturn working with a number of Catholic hospitals who were run by a group of sisters. And even though things were hard and there were questions about the future, they would tell stories about selling the chandeliers and selling this piece of land, that piece of property, or doing away with this practice because we will always support this. We will never not be that. And it was such a grounding story that they told that reminded people that we’re committed to this, no matter what we have to do to get there. I think that the level of commitment and that storytelling and remembering who we are, remembering why we are is really important.

And I really want to highlight a message you just delivered about visibility and that visibility through personal engagement. One of our core beliefs is that communications happen in a lot of ways. And part of it is the words that you use and the emails that you send out. But the messages that are delivered through the theater of physical interaction, walking the halls, body language in a presentation, being so optimistic that you’re willing to be present with people and shake their hands and hear their concerns, and cry with them, or pray with them, or be with them is hugely impactful. And it creates a kind of trust that is gold in times of change like this. Really want to highlight that point. I think it’s fundamentally important here.

[00:23:50] David Shifrin: Well, Michael and David, thanks so much for your time. It’s always fun. Always fascinating. And look forward to our next conversation. This has been great.

[00:23:57] Michael Peregrine: Thank you both.

[00:23:58] David Jarrard: Thanks, David. Thanks, Michael.

Subscribe to Jarrard Insights & News

Name(Required)

In High Stakes, Strategic Positioning

Inflation’s Rising Tide Sinks All Healthcare Boats

A depth gauge underwater, showing up to 6 feet

Want to be notified as soon as we publish new content like this report and the Quick Think? Subscribe here.

The Big Story: Fed Fights Inflation With Another Big Rate Increase

And: GDP fell 0.9% in the second quarter, the second straight decline and a strong recession signal.

Says Moody’s Analytics chief economist: “The economy is close to stall speed, moving forward, but barely.”

What it Means for Healthcare Providers

Aggressive inflation and the bitter medicine of rising interest rates are the latest gut-punch for providers serving in an endless pandemic, holding together an exhausted workforce, assuring anxious patients and striving to stay relevant and in business.

You’ve seen the plot points for a while. Wage wars. Rising medical debt. Tense payer negotiations. Hesitant, cash-strapped customers. The lack of supply and the cost of, well, everything, from gloves to scrubs to the burgers served in your food court.

But taken as a whole, where does this story take us? Paul Keckley wrote this week that he sees the impact in at least three broad categories.

But how does this big picture affect our agenda for this week’s leadership team meetings? As leaders and communicators, what do we do now?

Good question. To help, we tapped into our Jarrard Inc. brain trust and asked colleagues who work alongside providers big and small this question: “What does ongoing inflation and uncertainty mean operationally, and how should communicators address it?”

Here are their takeaways.

Billing and Cost of Care

By Abby McNeil, vice president, National & Academic Health Systems Practice

Bad debt will rise. That holds true for institutions and patients. Focusing on patients, systems may consider offering greater flexibility on payment terms to help manage the burden and minimize people delaying care due to cost concerns.

Communications Imperatives:

Physician Compensation

By James Cervantes, vice president, National & Academic Health Systems Practice

Competition and expectations will increase. Though they earn more than the average American, like the average American, their home pay is not keeping up with inflation. After record rises in 2021, inflation is set to again outpace expected physician salary growth of two to four percent in 2022. So those three percent increases provider organizations consider doling out to docs don’t go so far in showing the love.

Add to that increasing physician burnout, shifting Medicare fee schedule rates and growing reluctance to pay out shared savings – due to uncertainty and lower hospital margins – and you’re likely to have more unhappy docs coming through hospital doors. It’s a great opportunity for private equity firms, who are investing in physician practices with renewed vigor. For them, the promise of streamlining operations, reducing management responsibilities and increasing compensation makes for an attractive package.

Communications Imperatives:

Labor

By Isaac Squyres, partner, Regional Practice; Teresa Hicks, associate vice president, National & Academic Health Systems Practice

Unions will be pushing. Persistent inflation in an already highly competitive job market could easily lead to continued pressure on labor costs for providers. This time around, it won’t be driven by the cost of travel labor as much as current employees looking for higher-than-customary cost of living and/or merit increases. Don’t be surprised to see unions using inflation during upcoming negotiations as leverage to push for wage increases.

Communications Imperatives:

M&A and Distressed Assets

By Isaac Squyres and Abby McNeil

More hospitals will be for sale, fewer buyers will be available. The eye-watering inflation figures keep triggering rate hikes, with another 75-point rise this week. That will continue to increase the cost of capital for systems evaluating potential deals from the buy-side and lead to pressure for those on the sell-side. With financing set to get harder and more expensive to access, highly leveraged organizations will feel the stress on their balance sheets. Large banks may already be pulling back credit availability to their big customers, potentially leaving organizations to go through other lenders or private funds to get through new projects or even to cover current needs.

Communications Imperatives:

Payer Relations

By Teresa Hicks

Everyone will look to cover shrinking margins. The jump in consumer prices is cranking up the heat in the pressure cooker that is payer/provider relations. Each side is bringing that extra stress to the negotiating table.

Communications Imperative:

Investing

By Sheila Biggs, associate vice president, Health Services Practice

Pressure to execute will increase. After a hot run of investment in 2021, economic uncertainty is starting to cool healthcare PE in 2022. That trend may continue as inflation points to a decent chance of recession. Valuations are now stabilizing after reaching significant heights over the past 12 to 18 months. The result? A greater focus on dialing in the operations and path to steady growth for existing portfolio companies. Resources and expertise will be deployed towards optimizing what’s already there, ensuring a pristine product-market fit and an emphasis on providing a great experience for patients and employees. In the end, that benefits everyone.

Communications Imperatives:

Social determinants of health

By Erika Matallana, associate vice president, Regional Practice

A perpetual problem will reach more people. Interest is growing in food-as-medicine. But with prices rising, the ability to use non-medical interventions to heal or prevent disease has become more difficult. Documented in countless reports over the years, many vulnerable populations have never had the option of food-as-medicine. Whether urban communities of color or the rural poor, purchasing healthy food has long been a financial stretch – if fresh vegetables are even available. What’s new now with inflation: The threshold for who can approach food-as-medicine has been raised, and even unhealthy food is becoming more expensive.

Communications Imperatives:

  • This is the time for empathetic and transparent conversations with employees. Check in on them. Find out what they need.
  • Share more with employees about the headwinds your system faces. Employees who believe in the work you do deserve to understand why you’re making the decisions you are, especially if they’re impacted.
  • Re-up your price transparency and cost-estimator efforts. Make it as easy as possible for people to understand what they’ll be paying and how they can do it.

Physician Compensation

By James Cervantes, vice president, National & Academic Health Systems Practice

Competition and expectations will increase. Though they earn more than the average American, like the average American, their home pay is not keeping up with inflation. After record rises in 2021, inflation is set to again outpace expected physician salary growth of two to four percent in 2022. So those three percent increases provider organizations consider doling out to docs don’t go so far in showing the love.

Add to that increasing physician burnout, shifting Medicare fee schedule rates and growing reluctance to pay out shared savings – due to uncertainty and lower hospital margins – and you’re likely to have more unhappy docs coming through hospital doors. It’s a great opportunity for private equity firms, who are investing in physician practices with renewed vigor. For them, the promise of streamlining operations, reducing management responsibilities and increasing compensation makes for an attractive package.

Communications Imperatives:

  • Hospitals and health systems seeking to keep physicians happy and honor their hard work from the pandemic years will probably need to go beyond three percent.
  • Employers need to focus on the mission of the organization, the role the organization plays in the local community and how employment or affiliation with that organization can provide physicians with the personal and professional satisfaction that they’re looking for. But again, that promise must be backed by delivery.

Labor

By Isaac Squyres, partner, Regional Practice; Teresa Hicks, associate vice president, National & Academic Health Systems Practice

Unions will be pushing. Persistent inflation in an already highly competitive job market could easily lead to continued pressure on labor costs for providers. This time around, it won’t be driven by the cost of travel labor as much as current employees looking for higher-than-customary cost of living and/or merit increases. Don’t be surprised to see unions using inflation during upcoming negotiations as leverage to push for wage increases.

Communications Imperatives:

  • Provider leadership needs to engage in and facilitate conversations now between nurses, unions and administration.
  • In addition, have conversations about what employees may be looking for outside of monetary compensation to help with engagement, job satisfaction and retention. Those things may not fully make up for hourly-wage expectations, but it can help take the edge off. Be clear about what your organization can and can’t do – and why.

This piece was originally published over the weekend in our Sunday Quick Think newsletter. Fill out the form to get that in your inbox every week.

Subscribe to Jarrard Insights & News

Name(Required)

In Change Management, DigitaLee, High Stakes, Strategic Positioning

DigitaLee 12: Poetry vs Prose

Orange text that reads "The Digital Future of Healthcare" with smaller text at the bottom saying "DigitaLee with Lee Aase" on a navy blue background

DigitaLee 12: Poetry vs Prose

This week on DigitaLee, David Shifrin and Lee Aase talk about a potential reset in the startup economy, some of the digital apps and therapeutics that are making care more efficient regardless of the economic outlook, and then notes for healthcare provider organizations looking to implement or partner with those digital health tools.

Listen and subscribe to the podcast, or read the transcript below.

Read the Transcript

David Shifrin: Well, it’s no surprise to anybody that we are likely, or at least potentially, staring down the barrel of an economic downturn, possibly recession. And that has huge implications for everybody, of course, but also the investment community because when money is cheap, when interest rates are low, it’s easier to invest. And so there’s an interesting article in Fierce Healthcare titled “Here’s why some VC investors say an economic downturn can be good for digital health.” The general point of this article is that when it’s harder to build something, better things will get built. It’s the cheap and easy stuff isn’t as likely to be built. And so I think it’s exciting and also challenging because it means that innovators and entrepreneurs and startup founders and all the rest, people who are looking to make change, they’ve got to work harder and really find that product market fit, make sure it’s sustainable and all that. But talk a little bit about, you’ve got so much experience in the startup world as well as the digital world. What do you think about this idea that a downturn may be helpful in resetting the market?

Lee Aase: Yeah. Oh I think it’s, I think it’s right on because it really does impose a discipline on the startups to be having a product that people are willing to pay for that is meeting a real need that they’re eager to have. And it’s not just built on fluff and hope and hype, given what the project that I’m personally involved in right now, we’re focused on providing real value to patients. And as I look at it, we have concerns about a downturn, but we’re also saying, if you’re a low cost provider of a good service in a down economy, that actually creates big opportunity.

Because if you’re able to do that and then to scale, that’s meeting a real need, people will need healthcare, they will need health-related services. That’ll be something they’ll be likely to prioritize.

And what’s remaining to be spent after the doubling of gas prices and all is something that will be probably disproportionately skewed toward healthcare. But so then it makes the value delivery proposition really all that much more important.

You know, you don’t want a downturn, you’d rather, you’d prefer there not be. But given that’s a reality, and I think it’s everybody’s pretty much saying it’s a foregone conclusion that this is going to happen, so you might as well embrace that and understand what the new terrain’s going to be like.

And that really is putting constraints on an enterprise, causes it to need to be much more resourceful and need to make sure that everything you’re doing is contributing toward value for the customer. And it’s like in poetry versus just prose, okay? Poetry puts a limitation on it, and that’s why poetry and music, songs, can be much more meaningful is because it sets rules around you, that in terms of how you have to present your thoughts and your ideas versus rambling on a podcast like this.

David Shifrin: That’s so interesting because somebody I was talking to a couple weeks ago used a similar analogy. He was actually talking about a wedding toast that he had heard, and he made the point about the difference between being contained or having a container, rather than a cage. And those can seem very similar, but they’re not. And the guy I was talking to referenced it and said it’s like poetry and prose.

Lee Aase: Yeah I mean, I’m about to have the sixth of my children get married at the end of July. And what I’ve done for the others is that the father of the bride, father of the groom always, often, gives a toast or gives a speech. I’ve always done a poem, you know, it shows some thought going into it and a caring, actually, about – not to hammer on anybody who doesn’t do poetry in their wedding toast – but it’s just a way of showing that, yeah, I spent some time thinking about this and so I think it’s that same way with an enterprise that those kind of constraints, those rules and the rules of cash flow, as well as profitability, are things that impose a discipline that will, that can be very constructive.

David Shifrin: So let’s focus specifically then, Lee, on some areas where it does seem that there’s great value. And you’re talking about being able to deliver care more efficiently and cost effectively.

And so as you and I were prepping for this, bouncing some articles back and forth about the rising value of digital therapeutics and mental health apps, and then you also sent over a couple of ideas around digital diabetes treatments.

Lee Aase: Yeah. Well, when you’re talking about the things that affect the healthcare system, diabetes and diabetes related illnesses are just massive in terms of the impact on mortality, on morbidity, on just the finances of the healthcare system. And so Virta health is one of those startups based out of San Francisco.

And they’ve had about 50% of their patients be able to reduce or eliminate medications and get blood sugar normalization through dietary intervention, but it’s a real, it’s a high touch by high tech kind of approach. At Indiana University, Dr. Sarah Halberg led the research on this, where they did, it’s not a randomized control trial, but it was a targeted intervention where they were able to take patients who had type 2 diabetes give them this app-based interaction where they’re getting coaching and support from professionals who are able to help them in the behavior change, and to give them advice and help them to make these changes. And when you look at the amount of money that’s being spent on diabetes, medications and complications of diabetes, there’s a reason why I think the last I saw was that the market valuation for Virta health was $2 billion.

And so it’s all…the point is there’s a lot of opportunity there and that’s one in particular that I’ve seen. Levelshealth.com is another really interesting one. It’s more on the…the idea behind it is providing a way for people who are interested in blood sugar control, interested in their metabolic health, to be able to get a continuous glucose monitor, which ordinarily is only prescribed for people with diabetes as a way of monitoring their blood sugar day to day.

But a lot of people are becoming convinced type 2 diabetes doesn’t happen overnight. And by understanding better how our bodies react to different kinds of foods, we can maintain better blood sugar control for a lifetime and avoid the type 2 diabetes.

David Shifrin: So it becomes proactive rather than responsive.

Lee Aase: And there’s a, they’ve set up really an elegant platform.

A couple weeks ago that I went and signed up on their site, they have a waiting list. Okay, you sign up and you’re on a waiting list, which seems really weird for a company that’s selling the ability to have continuous glucose monitors, but then I think the point of that is that it’s membership based. So there’s a couple hundred dollars annual membership fee for this, then you go through a health questionnaire and then they do have a physician or medical licensed medical professional who’s able to prescribe a continuous glucose monitor. And anyway, I just got notification that my unit is shipped and I’m going to get to use it, but they did a really…I think there’s some interesting parts of this, by having the waiting list, it does create a scarcity sort of a feel. Also helps them monitor or make sure that they can manage a really good experience, that they’re not going to get overwhelmed with it.

David Shifrin: Just considering what we were talking about earlier, I mean, if you’re going to do this, you’ve got to do it, you can’t just pull in a bunch of money and then grow and then realize that you can’t sustain it. This has to be done well.

Lee Aase: Yeah. And then I think the other part of it is, by creating that scarcity, once you sign up, then you’re on their list and you get emails, and they get educated about it. Because I could see how some people might have misgivings at first when they say, oh, there’s a membership and that’s before I even get a CGM. And so giving people a little time for it to marinate a little bit is like a sales funnel, an extended sales funnel, for this that is creating an aware, a better understanding of the model and how their system works. So by the time, you know, it was like last week I got the email saying you have a chance to actually get into this, now you can get off the waiting list and get into it. And I was ready to do it, but I also wanted to experience what this platform was like.

So that I could have a better understanding of what’s happening in these in these startups and how they are. Really I think it’s a really interesting way, and we’ll have a really high impact on people being able to take charge of their own health.

David Shifrin: Yeah. And again, so much of this and so much of digital therapeutics and digital health in general is avoiding problems before they become problems. and that lowers costs down the road. That improves the economic balance in healthcare and society in general, so it makes a ton of sense.

So then Lee, as you think about a potential reset in the market and providers of all types are always looking to partner implement new software solutions, digital options, to improve care delivery all the rest, what does the process look like for that right now to make sure that you’re improving the patient experience and delivery of care, keeping costs down and frankly, picking a solution that’s not going to vaporize in two weeks because they ran out of money?

Lee Aase: Yeah. So I think it’s important for the clinical folks to be really bought in on “this is something that will be good for patients.” This really makes sense, from the patient care perspective or from the prevention perspective that this is something that they believe in.

And then being able to evaluate it in the context of so what are the costs of this? Is this going to add to us being able to provide this kind of care? Where can it save us money and some of the other things that we’re doing that will enable us to deliver a better value?

And then yeah, right, looking at the financial situation with the company itself and saying, does this model look like something that is not going to be gone tomorrow? That it’s something that if we’re going to go to market with it with our patients, that this is something that’ll stand the test of time, or at least make it as far as we can tell. Like stand the test of time sounds way…first of all, it’s a cliche story about that. But that it will stand the test of the current turbulence. And that this is a company that is likely to be able to sustain the value and sustain the services to our patient.

David Shifrin: Cool. Thanks, Lee.

Lee Aase: Thank you. I always love this.

Subscribe to Jarrard Insights & News

Name(Required)

In High Stakes, M&A

Notes from Chicago: Talking Points at the 2022 AHLA Annual Meeting 

Text that reads "American Health Law Association" with their logo on the left over a city backdrop

In-person events continue to bring energy back to the healthcare conference circuit. Last week, a group from Jarrard attended the American Health Law Association 2022 annual meeting. We joined more than 800 other attendees, mostly healthcare attorneys representing both law firms and in-house council for provider organizations. The rooftop receptions and perfect weather were a great follow-on to the Miami conference we attended in May and made for an excellent backdrop to discuss the challenging topics of mergers, partnerships and crises.

Here are a few key themes we heard while reconnecting with friends: 

Lots of activity…but are the buyers there? 

Generally, healthcare deal attorneys indicated that they’re busy. There are a number of deals progressing towards milestones in both the acute and non-acute side of things. Financial pressure is expected to drive activity in the acute care space over the coming quarters. CARES funds have run out. Bond covenants loom on the horizon… The expectation is that more hospitals and health systems who are financially challenged or distressed will be looking for partners. On the private equity side, there’s still quite a bit of dry powder – though if, when and how it’s deployed remains to be seen. 

Looking more closely at activity among hospitals and health systems, sellers need buyers and there’s a question whether all of those seeking a partner or buyer will be able to find one. Potential hang-ups include the fact that financing gets more expensive by the day and that the FTC, DOJ and state AGs are training their powerful microscopes on consolidation – we’ve already seen several deals called off in recent months. 

A search for greener pastures 

Marriages weren’t the only thing that had attendees’ attention. Breakups, too, were a topic of conversation. Observers in the M&A world say organizations are evaluating their current partners to figure out whether they’re still the right relationships. And, whether there are more attractive prospects out there that would be a better fit for the organization going forward. It wouldn’t be a huge surprise to see an uptick in the number of partnerships that unwind. 

A parallel topic among AHLA attendees involved the fit between organizations coming together in out-of-market mergers, a few of which are sprinkled through the list of recent deals. Cultural fit, in particular, was top of mind. Organizations looking to partner across markets need to ensure a thoughtful integration process – an imperative that holds true in both the acute and non-acute space. 

An emphasis on equity 

Health equity was very much a topic of conversation, particularly at the plenary sessions. Erin Richardson, chief of staff in the Office of the CMS Administrator, emphasized the “Biden-Harris administration’s focus on equity” during her keynote address. Our takeaway? Anyone considering a deal must have a message and plan for how a potential partnership will impact health equity. 

With the meeting taking place days after the Supreme Court’s decision to overturn Roe v. Wade, there was an undercurrent running through the conference about possible effects of the decision. Questions centered on what the ruling will do for employee recruitment, particularly for younger workers. Will healthcare workers want to move to states with restrictive abortion laws? Will college, nursing, medical or graduate students want to attend school in one of those states? Speaking of health equity, how might this set us back? And, for companies considering employee benefits allowances that cover travel for services not available in certain states, will the laws even allow it? The potential ripple effects are extensive and inchoate. 

Historic uncertainty 

All told, throughout the conference lingered a feeling also evident during the AHLA Transactions Conference back in May. For the first time, given the competing market forces converging on healthcare, the outlook for the next few quarters is remarkably uncertain. 

The AHLA takeaways gibe neatly with what we’ve been hearing from our clients whom we’re advising on communications and political strategy for a range of partnership projects. With seemingly more sell-side projects in the offing, will the buyers be there to get deals done in an ever-complex and challenging environment? Our advice: Sellers need to explain what they have to offer potential buyers. And, of course, continue to expect a lot of scrutiny for any proposed deal. 

Above all, get out first and control your narrative. 

Questions about the role of communications before, during and after a deal? Give us a call or fill out the form below.

Subscribe to Jarrard Insights & News

Name(Required)

In DigitaLee, High Stakes, Issue Navigation

DigitaLee 11: Crypto Scams on LinkedIn and Tracking Pixels on Hospital Websites

Orange text that reads "The Digital Future of Healthcare" with smaller text at the bottom saying "DigitaLee with Lee Aase" on a navy blue background

This week on DigitaLee, David Shifrin and Lee Aase talk about digital security in two forms. First, the general trend of hackers and scam artists constantly finding new ways to snag your info…and money. These days it’s a cryptocurrency scam on LinkedIn costing people tens of thousands of dollars. The second thing is the recent news that many hospitals have tracking pixels placed not just on their websites but on their patient portals. That’s bad news and a bad look when it comes to healthcare marketing and, most importantly, patient privacy.

Listen and subscribe to the podcast, or read the transcript below.

Read the Transcript

David Shifrin: All right. So a brand new topic today, Lee, something that nobody has ever talked about before, ever. We were digging under rocks and found this. No, it’s not true. I wish it was true, but it’s not. Conversation today about cybersecurity and protecting our own personal information, and this really started with an article that we found – I think it’s from CNBC – talking about a LinkedIn scam where people are creating fake profiles and then pulling people into cryptocurrency scams while they pose as financial advisors and bilking people out of a lot of money.

So that kind of raised the issue of you always have to be wary about what you’re dealing with online, and then led into sort of a wider conversation about just personal information online in general, which brought up this other new problem that has been revealed recently, where tracking pixels have been placed on not just hospital websites, but in some cases on patient portals. And that is allowing for the transfer, the sale of private health information and other personal information from patients to be sold.

Lee Aase: Yeah. the LinkedIn article – the article about using fraud on LinkedIn, people setting up fake accounts and enticing others into investing in cryptocurrency – and then the story the one person featured was that that they had been directed into Crypto.com, a reputable site, and then building that relationship and then over time having it being migrated or being encouraged to migrate into another site owned by the other, by the bad guy. So I think it’s just good for us to know that people who are wanting to do us ill are restless. Restless. They do not rest and they’re very eager to exploit opportunities.

I see it all the time with text messages that I get saying “an AT&T message: your bill has been paid and please accept your gift” with a link to click, there’s all sorts of just shady things like that are happening. And just I guess eternal vigilance is the price of liberty, as the old saying goes, or the price of yeah, economic liberty. Because the person in this particular case had lost $280,000, had been swindled out of that. And I guess what we’re seeing with these digital platforms is just a lot more opportunity for people to have a broader, for the bad guys to have a broader range, broader scope in terms of an audience that they can try to exploit.

DS: What’s interesting about that article too, I thought, was that it highlighted that LinkedIn is a good place to scam people because people look at LinkedIn as a relatively safe professional place to go. And I think your point is exactly right. They just have to be wary and can’t, frankly, can’t trust anything.

LA: Yeah. They also post that they work at a given institution or for a given company. And there isn’t any verification of that. That’s they’re alleging that. And I’ve had that back before, in my days working with Mayo Clinic, somebody would say they were a Mayo Clinic employee, and they were reaching out to me, and I’d look them up in the directory, in our online directory, employee directory to say, so is this even really a…I don’t recognize this person, is this a Mayo person? But it’s so easy to just say, oh this is somebody who works with me. Yeah, I’ll accept them, whatever.

DS: And then I don’t know if you want to talk about this here, Lee, but you had mentioned too that you had a recent experience with some bots and spammers that fits in with this.

LA: Yeah, it was just crazy. It was right along these lines. And speaking of AT&T, I got a call from AT&T that someone was trying to purchase a phone using my phone number and they had, they were calling to confirm that it wasn’t me, or to check that it wasn’t me. And I said, no, that’s not me.

And when I hung up, I opened my email and I had about 200 different email list subscription things that were coming in saying thank you for signing up for the Indiana Department of Labor list and for the US Agency for Economic Development. And so I did a Google search and said, so why am I getting all these emails for subscription lists?

And I guess this is a scam that’s happening now, where people do some kind of a hard, they were trying to get a free phone, and what they’ll do then is use your email address to subscribe to email newsletters that don’t have a captcha on them, you know, prove-that-you’re-human kind of thing, so then the idea is that when that, AT&T notification comes that it’s swamped by all these other emails that you’re getting as well, and you end up deleting it and not recognizing that it’s happening.

They’ve harvested the lists of all these places where they can push one button and put in your email address and subscribe you to all of them through a bot, and then it’s just a matter of creating chaff, creating counter measures that prevent you from seeing what’s going on. So yeah, that’s just one new wrinkle about the relentlessness and restlessness of the bad guys in terms of figuring out new ways to cover their tracks.

DS: Lee, let’s flip this then from sort of our responsibility – it’s always our responsibility to be vigilant – but to think about this in terms of what we actually give permission for and our expectations around privacy. Our information, as everybody knows, is out there everywhere; we sign up for Facebook, we sign up for Twitter, we sign up for anything, and with cookies we’ve just signed our whole lives away. And yet at the same time, there’s still an expectation, right, that certain elements of our life should be private, particularly when it comes to health.

And so that is a concern now with these, the exposure of tracking pixels being placed on provider websites and on patient portals. So talk a little bit about how social media is collecting information, how these pixels work and why it is possible.

LA: Yeah. When a pixel gets placed on a website and whether in this case that we’re talking about here, you’re talking about patient portals, I think that’s just amazing to me that someone would think that was an okay thing to do. It’s one thing when it’s a regular hospital website, when you’re into the patient portal, then you’re looking and you do events that trigger capture of information.

And they were talking about that; the name of the patient, the time of the appointment and the doctor…so if it’s a specialist in gynecology or in other, whatever specialist, whatever specialty it is, it can be pretty revealing of what kind of interest or condition that the patient might have.

I think hospitals and health providers that are dealing with pixels at all on their sites are really setting themselves up for pretty a big privacy concern blowback, that there will be some episodes like this that will come in the future where information gets disclosed, that somebody will raise a major issue and people and organizations that are using these within their sites are going to be not in a good spot. They’re going to have reputational risk. And I just don’t think…they have reputational risk now, they will suffer reputational damage and there will be concern about it that’ll be hard to erase.

So I would really recommend that hospitals and other providers be super reluctant to engage in that and maybe be very careful. And I don’t know, there was the old Ronald Reagan saying “trust but verify”, but I don’t know, you know, I don’t think you should trust. I think it’s just, it’s playing with fire to be messing with that.

DS: So it does put a little bit of a crimp on marketing plans, because if you just say, look, we’re not going to mess with this at all, we’re not going to mess with pixels, then that does – and talking on the main website, not talking about patient portals, that should just be a given – but if you say we’re not going to even go near the fire much less play with it, then yeah.

That could have potential implications for how you’re doing retargeting, how you’re setting up your advertising campaigns. But I think that the challenge then is, or the call then is just to find other ways to reach people, use other tools. But don’t put yourself in a situation where you’re unwittingly violating all kinds of patient confidentiality.

LA: If you’re the gateway for information getting out about your patients, and even your prospective patients, getting shared with others and sold to others, that’s just not…marketing is something that’s done in healthcare, obviously needs to be done, but that needs to be put in and it needs to be in a very circumscribed place so it’s not doing harm to the people that we’re trying to serve.

DS: So then Lee, for the tip, I think that kind of is it, but more specifically, what are a couple of things digital teams should, after listening to this, should go and check, or that an executive should ask their team to make sure everything’s okay?

LA: Yeah, they should just be definitely finding out what the organization is doing and has done with pixel placement and use of these, and if they’re going to go into it, going with eyes wide open and really understanding in what limited respect they might consider using something like this, but it is playing with fire and likely to get burned.

DS: Okay. And then the other piece of this, again flipping it back towards the patient then, is so often we’ll get emails from different service providers saying whatever, “Xfinity will never call you requesting your password or your social security number,” something like that. And I think that ends up in the material that we get from hospitals or doctors’ offices in that sheaf of papers that we always have to sign in the privacy practices. But I think it’s also important just to, it’s one more responsibility on the providers, but to take the time to explain to your patients how you collect information, how you ask for information, what you’re doing, and to really give them the resources that they need to protect themselves and their personal health information.

LA: And in a way it’s like the survey fatigue that we all have because you get this “American Express wants to know what your experience was like with your most recent person” or Delta airlines or whoever. And with all these disclosures of privacy practices as the consumer, it is bewildering.

It’s just, it’s a snowball. And so finding ways to, as healthcare providers, to be clear about that and eliminate the jargon and try to be plain English communication. But mainly don’t do bad things. Use the mom test: what would you want happening with your mom’s information? And golden rule: doing unto others is you’d have them do unto you, that if you wouldn’t want your information used in that way, you probably ought to not be doing it. Especially given that many of our, many if not most, of our healthcare providers are nonprofits, so you’re supposed to have a charitable public service orientation. I think that weighs very heavily on the level of caution that you should be exercising when engaging in any of this kind of stuff.

Subscribe to Jarrard Insights & News

Name(Required)