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In High Stakes, Strategic Positioning

Inflation’s Rising Tide Sinks All Healthcare Boats

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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.

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In Change Management, DigitaLee, High Stakes, Strategic Positioning

DigitaLee 12: Poetry vs Prose

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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.

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In Change Management, High Stakes, Strategic Positioning

What Gets Measured Gets Managed: An Update on DEI in Healthcare

Text that reads "kaleidoscope" on a kaleidoscope-patterned background

Healthcare and society are now two years into a period of renewed focus on improving diversity, equity and inclusion for both those employed within healthcare and those served by it. The hope, after devastating inequity and bias were brought to light through the pandemic and George Floyd’s murder, is that this “period” will in fact be permanent. It’s well past time to finally solve the lack of diversity within the upper echelons of healthcare and the gaping chasms in access and health equity between white and Black (as well as brown) populations.

So, then, what progress been made in the past two years? Is momentum being maintained towards bringing more Black voices and experience into healthcare, not just in word but also in deed through investment of FTEs and financial resources?

With the second federally-recognized Juneteenth holiday just passed on Sunday, the Jarrard Inc. DEI team, which operates under the Kaleidoscope name, wanted to get a sense of what’s happening across healthcare.

To do that, we sent questions out to some of our expert friends from across the industry whose work centers on DEI in healthcare – and beyond.

Every contributor reminded us that representation matters – it’s table stakes. And several pointed out the importance of organizations and leaders meeting people where they are by developing initiatives that fit with how those affected already live. That, rather than trying to pull people in and putting the burden on them.

Here are six themes from our conversations. Full quotes from the interviewees can be found below.

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In DigitaLee, High Stakes, Strategic Positioning

DigitaLee 8: Netflix, Rent vs Own and How Health Tech Personalizes Healthcare

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

Welcome to DigitaLee, the podcast for healthcare marketers, where we look at the digital news, tools, tips and tricks for effective healthcare communications. This week, David Shifrin and Lee Aase talk about the news that Netflix is cracking on their long-standing policy of going ad free. Then Lee gives an update on the rent versus own debate – and that’s with regards to blogs and social media, not the housing market, although that might be an interesting discussion too. Finally, they close by talking about Lee’s latest venture the HELPCare Clinic as an example of how digital tools can help personalize health care.

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

Read the Transcript

David Shifrin: Well, hey Lee, going to kick off this week with the story about Netflix and streaming platforms. I almost bypassed this story because when I was looking around for digital healthcare marketing and saw this story about Netflix, I thought it was going to be just riding the coattails of all the discussion around Netflix.

And then I realized that it was from MM&M – Medical Marketing and…now I’ve forgotten what it is. What?

Lee Aase: Medical Marketing and Media.

David Shifrin: Medical Marketing and Media, they also rebranded not that long ago, I like their new logo. Anyway, despite the fact that I can’t remember what the 3 Ms stood for, it’s a solid site. They do some really good work. And so I thought it’d be worth clicking into it. The upshot of the article is that with Netflix now considering advertising, that could potentially change the game for companies looking about, looking at advertising in particular. I thought the really interesting point was that with economically thinking about this potential recession that we may be looking at, that is going to change sort of the ad spend and may open up some opportunities for smaller and mid-sized businesses to get in the game.

Lee Aase: Yeah. I just think it’s an amplification or it’s a multiplication of the number of places where advertisers can be, you know, and that as the continual fragmenting of the audiences, I mean, previously the Netflix audience has been inaccessible. Once somebody’s locked into Netflix, once they’re watching it, they’re uninterruptible and that’s actually been part of, a big part of the appeal as well is that people are able to watch things without being interrupted.

So, figuring out how that works within the Netflix platform will be interesting. But so many of these streaming services that are…Netflix had its 200,000 subscriber loss, and I think some of the others, being so many of these services that’ll supply demand. And especially if there’s an economic contraction that may open up space for smaller players to be able to get access to get their content into some of these niches that might fit really well with what their strategic goals are.

So I think it’s, yeah, the technology that the evolution of these platforms and their being ready to explore the ad supported, or at least partial ad supported, element is going to create some opportunities.

David Shifrin: How much do you think healthcare organizations should pursue this? And I don’t have numbers on this, but just thinking about my own viewing habits, which are primarily streaming, but I do watch regular or cable TV, I see…I can’t think of really any healthcare. I see some, I do see some pharma ads on streaming.

But you know, if I see an ad for Vanderbilt, my local hospital, it’s going to be on a local channel or on cable. It’s not coming through on an ad on Peacock, for example. So you know, how much value is there, and you’re talking about the audience fragmentation, is it worth a local hospital trying to get hyper-local targeting?

Lee Aase: I think that just depends on it might relate to what the initiative is. And is there a particular type of program that aligns really well with, we talked in the previous episode about some of them, diversity inclusion topics and initiatives.

There may be some places where if you’re able to get hyper-local targeting within these platforms, in addition to then content targeting, that you could find… I’d say there’s some opportunity. I’m not saying stop everything else you’re doing and pursue this, but it’s definitely something worth watching.

And I think the folks that have the most money to spend on it—the pharma folks—they’ll be the pioneers in that, I think. And as we in the provider space, in the hospital space, see what’s what they’re doing, I think that’ll spur some thoughts and some innovation among some of the marketing leaders to say, Hey, yeah, we could, this might fit for this particular initiative.

So it’s worth keeping an eye on.

David Shifrin: For the trend, I wanted to ask you about the current state of play on renting versus owning. And as I produce the content for Jarrard, we have a blog, we have a LinkedIn presence, and thinking about how we balance all these different platforms and where to focus.

So I think conventional wisdom for a lot of years is that organizations that are producing thought leadership and content want to own the platform. So that algorithm changes, any other kind of rule changes, aren’t affecting your ability to get that information out there, which is something we see with social media sites all the time, right?

Facebook changes their algorithm about every 10 minutes and it constantly changes the ability to be visible. But at the same time, there’s a lot of people on LinkedIn. There’s a lot of people Tik Tok. So how are you thinking about reach versus SEO, renting versus owning, website blog versus social media, et cetera.

Lee Aase: Yeah. I actually think of it as renting and owning. I think it’s like, you need to have the home and then you need to have the apartment in the, in the downtown or whatever, you know, it’s like, you need to be in both places and that’s actually a really helpful thing to be thinking about.

Because my bias has been toward having the control, that you need to have a home base. It’s important to have that, but I also recognize that the—like LinkedIn, for instance—with the thought leadership when you’re posting long form or longer form content, instead of just a link to your blog post you get readership there with people who don’t want to leave the app, and so you’re getting some impact from that. So I think being able to have maybe different versions of things that are in LinkedIn versus on the home base, maybe it’s an extended excerpt that you’re doing on LinkedIn or some content that is bespoke, as they say, for LinkedIn…I wanted to use that word, cause I’d never gotten it before and it’s…

David Shifrin: It is. It’s a very, it’s like a, it’s a sort of a…

Lee Aase: A super fancy word.

Yeah, exactly, yeah.

David Shifrin: You’ve got turnkey and you’ve got bespoke.

Lee Aase: Yeah. Very good.

David Shifrin: Yeah. And something that we’ve been looking at recently on LinkedIn is their newsletter feature, which is not new, but it’s been slowly rolling out, and so we recently on our Jarrard account got access to it. And so I’ve been cross posting a lot of our content there, and it is effectively a secondary blog that people can subscribe to. It does seem to hit some folks who aren’t necessarily always seeing our content otherwise.

So I think it’s a good thing.

Lee Aase: Right. Yeah and you want to go where the people are. And if to the extent that you’re putting content in a place where it can be liked and commented and shared…in addition, just the convenience of reading it on platform versus having to click off to your website.

We have goals that we want to get people to our website; that is part of our core ideas. That’s how people sign up and like, they join with us and having a blend I think makes a lot of sense.

David Shifrin: Then finally for this week’s philosophical tip or philosophical discussion—philosophical might be little bit too lofty of a term but whatever—

Lee Aase: Yeah.

David Shifrin: I’ve been thinking about navigating the intersection of digital tools and channels with the really personal, intimate nature of healthcare. You know, there was something in the article that we just talked about, the MM&M article, about how advertising isn’t really meant to be hyper-customized because you’ve got to reach a broad audience, it’s got to be general. But healthcare is ultimately the most personal thing that you can have. It’s literally somebody touching you to help you through difficult times. And so I was thinking about this and then thought this is perfect because you’ve opened a clinic. You are doing this, you have an extensive career in the digital space and are now in a very personalized clinic. So how are you thinking about that balance of personal with something that’s a little bit more hands-off through a screen?

Lee Aase: Yeah, a big focus is that we want to make it so that technology is the facilitator for the personal, the technology isn’t a barrier technology, isn’t something that just enables us to scale. It does enable us to reach more people, does enable us to target to a community.

But also, we don’t want the technology to be something that gets in the way of those human interactions. We want it to be the enabler and facilitator of those reactions. And a lot of that is if it’s convenient for the patient to use video conferencing, if it’s a way that we can see them more easily, like they’re feeling sick and they don’t want to come in, that’s telemedicine: in the post-pandemic era, isn’t a like, ooh, that’s a whole new thing, but is an application of digital technology in a way that is more human because it is more individualized. It’s about that intimate relationship. So I’ve been blessed, pleased at how the technology, used in the right way, can be really that facilitator to make some of the things that would have been more difficult to do previously, much easier.

And so it’s been an exciting time to be starting something new because of the way that…well we talked earlier in, maybe it was in the previous episode? about some of the transcription tools and things like that that are able to be harnessed and used within a practice to just take it to that… take away some of the grunt work, where technology can take some of that effort out of the way that would enable then the human, the more direct human interaction at a higher level.

David Shifrin: Yeah, just the grunt work. That’s literally what you just said.

Lee Aase: Well, yeah, let me just, just let me just throw in another thing. So one way that we’ve used this is…so I mentioned previously Dr. Dave Strobel is our our medical director, our founder of the clinic, and one of the things he does is go into depth, great depth in describing conditions.

He’s an educator, he’s a teacher at heart, he loves to help patients understand what’s going on in their body and why and how all of this stuff works. And that’s part of the reason we have a one-hour appointment as our basic unit of seeing patients. There’s a lot of stuff that he says a lot of times, and so if we can use the vide to capture some of that stuff (and that’s part of what we’re doing), our production is like, this is the thing that you’ve said dozens of times, hundreds of times to people as you’re describing metabolic syndrome or the various other conditions. He’s got a video that we did on baby table manners, things like that in terms of how to get your kids eating solid food and kind of the right order to introduce foods.

You know, he could go through that every time. And he has done that for 30 years with patients, but if we can capture that and then say, okay, these are online video modules that are of specific, can be a specific interest to different elements of the practice, members of the clinic, then when they come in, they can have watched the video and they can go deeper and they can probe on the questions and we can say, what didn’t you understand? Or what could I explain better? And that helps us make the next, maybe add another module. If we find out that another video to the series, if we’re finding out that it isn’t communicated as clearly as it could be.

So I think that’s one way that if you can take the broader topics where there is some, it’s still pretty specific, it’s still pretty focused and in-depth, but then enabling to go even deeper within the individual patient visit.

David Shifrin: That’s where you go from a turnkey video series to a bespoke one hour appointment.

Lee Aase: Exactly, there we go!

David Shifrin: How do like that?

Lee Aase: Great stuff. Oh, how about that? You are a trained communicator and a PhD to boot.

David Shifrin: I’m just writing my notes here, getting my points in. All right. Thanks, Lee. It’s fun as always.

Lee Aase: All right. Appreciate it. Talk later.

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In High Stakes, Issue Navigation, Strategic Positioning

Event Recap: Healthcare M&A from and Around the AHLA Transactions Conference

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Healthcare mergers and acquisitions are having an interesting moment and were quite the topic of interest at April’s American Health Law Association’s Health Care Transactions Conference. As has been reported numerous times over the past year or two, the number of deals has dropped but the average size has gone up. Questions about how the current administration and FTC would approach consolidation have been a talking point across industries since now-President Biden won the presidency. Some massive deals go through, others get scuppered. And in the middle of these moves by traditional providers, private equity continues to evolve its role in healthcare delivery, bringing organizations together and backing them with capital and operational guidance.

With that backdrop, we circled back with a few of our AHLA friends to get their impressions of the current healthcare M&A environment. Specifically, we asked them:

  1. What were your top two takeaways from the event or conversations surrounding it?
  2. What was the biggest surprise?
  3. In light of the above, what are the top considerations for provider organizations to successfully navigate a transaction today?

Here are the topline takeaways. Quotes from the experts follow.

Themes

Uncertainty and concern around regulatory scrutiny of deals remains. And it’s not just from the FTC, but from states, as well.

The cost and shortage of labor, particularly travel nursing, is having downstream effects on the cost of doing business and patient outcomes.

Surprises

In the PE world, valuations are rising but not always for reasons one might expect. In many cases, multiples are pushing valuations as much as margins are.

It’s not just small, independent organizations that are being buffeted by a tough financial outlook. It’s a rocky landscape even for large systems, and that will likely be seen soon in M&A volume.

Across the board, seasoned industry veterans are expressing a notable level of concern thanks the rising cost of doing business and the added scrutiny on transactions.

Advice

Running a clean, organized transaction process is more important than ever.

Get counsel involved early to stay ahead of regulatory roadblocks.

Make the case for a deal – clearly and early.

Rex Burgdorfer

PARTNER

Health systems we talked with have been upended by the trend of traveling employees, especially nurses. In many cases, the cost structure of the organization has risen by 20 percent. The impact can not only be felt in the financial statements, but also in quality and safety measures. Temporary staff are often working in unfamiliar departments, with new equipment, and without the muscle memory on a team. The New York Times covered this well a few ago:‘Nurses Have Finally Learned What They’re Worth’

What were your top takeaways?

Health systems we talked with have been upended by the trend of traveling employees, especially nurses. In many cases, the cost structure of the organization has risen by 20 percent. The impact can not only be felt in the financial statements, but also in quality and safety measures. Temporary staff are often working in unfamiliar departments, with new equipment, and without the muscle memory on a team. The New York Times covered this well a few ago: ‘Nurses Have Finally Learned What They’re Worth’

What was the biggest surprise?

The degree to which historically high-performing systems have been shaken in 2022 was a surprise. While we don’t yet see the impact on M&A volume statistics, I think we will in the coming quarters.

What are top considerations to successfully navigate a transaction

Transparency is key. Designing and implementing a competitive process to provide fiduciary decision-makers with a basis of comparison has always been central to demonstrating to regulators (e.g., state attorneys general) that the terms and conditions achieved in a particular transaction are “fair.” Where a lot of systems go wrong is not using the LOI stage to proactively communicate the rigor of the market clearance, the rationale behind the combination and merits of the partnership to AGs.

Krista Cooper

SENIOR HEALTHCARE ATTORNEY

What were your top takeaways?

My biggest takeaways were related to the conference’s antitrust track. Essentially, between the FTC’s new “holistic approach” to merger review and the increased scrutiny on affiliations, we can expect more vigorous reviews on the federal level. When you layer that with new state laws requiring pre-transaction notifications, the shifts could have material impacts on the approach and timing of some transactions.

What was the biggest surprise?

Given the pace of PE transactions in 2021, I was surprised to learn that unspent capital is still near record highs.

What are top considerations to successfully navigate a transaction

Prepare and prepare some more! Provider organizations considering a transaction would be well served to understand their organization’s operations, the market conditions, and the basics of the regulatory landscape. Deals are still moving very quickly whenever possible, and being well organized with good professional support can make a big difference.

Jay Greathouse

PARTNER

What were your top takeaways?

Whether it is on the equity and funding side, or on the compliance side, healthcare transactions are under a tremendous spotlight from every level. Couple this scrutiny with a greater demand by sellers for creative upside capture (e.g., earnouts, aggressive liability limitations, representation and warranty insurance growth, etc.), and there is significant pressure on what the market will support in transactions.

What was the biggest surprise?

Healthcare transactions are always under scrutiny, so many practitioners see it as simply part of the practice. But hearing so many seasoned practitioners raise the flag on the new long-look landscape was eye-opening.

What are top considerations to successfully navigate a transaction

Transaction fundamentals matter more than ever. That means good governance behind an organized, clean transaction process being run by reputable counsel. Add in the antitrust scrutiny and greater examination of transitions, and I think we will see an uptick in deals that stall, fail or unwind – and that’s when the quality of the transaction will be examined in the public and courtroom.

Jay Harris

PARTNER

What were your top takeaways?

The keynote speaker discussed the returns on investment for private equity investments in healthcare. One of the statistics mentioned was that almost half of the returns enjoyed by PE investors in healthcare in the last decade have come from the increased multiples. Meaning, the improvement in multiples provided as much of the return on investment as revenue increases and margin improvement combined. Can we expect multiples to continue to increase over time from current levels?

What else stood out?

Michael Ramey

PRINCIPAL

What were your top takeaways?

I heard an overall uncertainty, and some anxiety, regarding the level of anti-trust enforcement going forward. The administration has definitely communicated an increased focus on healthcare transactions, but the level of enforcement beyond acute care seems to be uncertain.

Also, an interesting fact conveyed by the keynote speaker is that valuation creation in private equity-backed entities, historically, has been through revenue and multiple expansion, not margin expansion. That leads to the question if such growth is sustainable.

What was the biggest surprise?

The biggest surprise to me is the prior noted comment regarding the lack of margin expansion in private equity-backed deals. This runs counter to the MSO model of creating efficiencies through scale to generate incremental value.

What are top considerations to successfully navigate a transaction

I think the tried and true approach of involving competent healthcare legal counsel early in the process to navigate regulatory and transactional landmines remains key, along with involving healthcare-specific financial and compliance advisors. Several stories were shared at the conference of bad outcomes when this isn’t followed.

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In DigitaLee, High Stakes, Strategic Positioning

DigitaLee 7: Diversity in Healthcare Advertising, Accessible Content and Supporting Healthcare CEOs

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Welcome to DigitaLee, the podcast for healthcare marketers, where we look at the digital news, tools, tips and tricks for effective healthcare communications. This week, David Shifrin and Lee Aase look at an article from Fierce Pharma that describes a marketing and ad agency building out a dedicated team to work on diversity in advertising. Then, they check in on the conventional wisdom around ways to ensure that content is broadly accessible and close by talking through the role of healthcare marketing teams and supporting the CEO.

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

Episode Links

Read the transcript

David Shifrin: Well hey, Lee, good to talk to you again. We’ll jump in here. And episode seven, we’re about to have seven of these things, what do they say, in the can? So, for this first story here it’s from Fierce Pharma. The title is “CMI Media Group launches new practice to help pharma reach out to diverse audiences.” And of course this is coming in the midst of what’s really at this point a two-year elevation of diversity, equity, inclusion, health equity. And really rethinking how healthcare as a whole and how we as society approach equity.

It’s a really important push and all the social change that we’ve seen. And so this is just another thing, inclusive marketing. The quote to latch onto here I think for me was that… it says, “With new technology that’s allowing brands to target messaging to specific audiences like never before, there’s a big opportunity for pharma to be more inclusive and equitable in its messaging, said the chief media and innovation officer at CMI.” And so again, this is focused on pharma, but I think the ideas here apply to healthcare providers as well. So you know, what’s your, what are you looking at in terms of inclusive messaging when it comes to any new pushes or new technology, new campaigns?

Lee Aase: Yeah, I think the newer technologies that we have just make the content production much more cost-effective, much more inexpensive than it’s been previously. So I think spending some time on listening to people coming from different backgrounds and perspectives and better understanding what sort of message will pull through with them better. It’s like an online focus group, kind of using social and digital as a way of gathering intelligence in terms of what kind of messaging is going to have impact. And then just being really focused on, okay, what are some of the broader initiatives that we have and where can we specifically reach out in a particular area of need?

So for instance, colorectal cancer is something that affects everybody, like affects all races, all ethnic groups. The African-American community has a higher incidence and a need to potentially get screened earlier, typically. And so being thoughtful about how you can be doing that messaging, how you can be finding the right platforms to be able to reach the particular audiences I think is something that has been a priority and should continue to be, and not just pharma but provider groups as well, to be really proactive in that outreach.

David Shifrin: Do you think this is new? Or is it just that we’re in a moment socially and technologically where people are thinking about it in a slightly different way?

Lee Aase: Yeah, I think it’s just becoming more easy to execute on this kind of outreach. I mean, there definitely is a heightened awareness and a heightened interest and wanting to be very proactive in reaching out to people. And one of the top things that was mentioned in the article is a particular genetic disease that the founder of this group, this innovator, had, that his wife was Cambodian and there’s a particular disease that affects Asians more and some members of his family had been diagnosed with it.

And so just a recognition that more than ever before, there’s an opportunity to achieve business goals that are important and are sustaining to the enterprise while at the same time being able to target messaging to a particular audience in a way that’ll be more attractive to them and resonate with them and cause them to maybe even collaborate and share in spreading the message.

David Shifrin: Yeah. Okay. I thought what you said at the beginning of that answer was interesting, where you said it’s easier to do. And I don’t want to put words in your mouth; when I hear tha,t my reaction is okay, if it’s getting easier, then there are fewer excuses to not do it. So let’s do it!

Lee Aase: Right. Yeah. I mean the cost of production of this stuff and being able to tailor things is getting easier. The cost of listening. With the way the ability is as AI and other tools are enabling you to get… at least to bird dog some insights, that for them, the humans, to come in and say, okay, how do we do this in a genuine way versus just what the borg would say in response to this that we’re gathering.

David Shifrin: Okay. So for our trend this week – I created an awkward transition here, but I don’t know, maybe it’s not that awkward – but then thinking about another type of inclusivity, I was thinking about this actually producing our content for Jarrard recently. And it’s making sure that content is accessible for folks who may be visually impaired or have hearing impairments, or whatever it might be.

And so we hear a lot of things about…it’s stock at this point, I think, ensuring that you have all texts on images, that you have an opportunity for having subtitles on videos. And I think that’s not only for folks who may be hearing impaired, but just if somebody is in an office and they want to watch a video, they need to be able to see what people are saying. Anything that you’ve seen or you’ve thought about in terms of making content as broadly accessible as possible, or is it just keep doing what we’re doing?

Lee Aase: Yeah. Yeah, I think that’s a good, so it is keep doing what you’re doing and maybe expand it a little bit, and I would also say that it’s one of those things where you’re doing well by doing good, because it isn’t just that it’s more accessible for the visually impaired or hearing impaired.

That’s all true, but also the fact that it’s helping you with your SEO, as you mentioned, as people are doing the…if you’re doing captioning on videos, for instance, not so much the SEO side, but the captioning of videos, a lot of people are in a place where they can’t, they don’t have the liberty to play the audio.

But also just stopping the thumb as people are scrolling over something in the feed. If they’re seeing the words that’re there, it’s more likely to draw them in, so it’s about effective multi-sensory communication. And if you do that for people, so it’s multisensory communication for people who have access to all those senses, but for those who lack them, it’s at least making it, or giving them an entrée.

I’d also say the overlooked thing is the extended captions on videos, not captions, but descriptions, particularly on YouTube because that’s part of the whole SEO process. And also then the ability to include links within the videos. That’s not exactly the undiscovered territory, but maybe the forgotten territory.

It’s one of those things that people could put more focus on and get for a relatively small investment of time. Especially when you have the ability to do natural language translation of… an AI translation of audio. If you can get that converted to text pretty reliably, then using that not only in the caption but in the description (or good substantial sections of it) to the extent that the character counts allow is a good thing.

David Shifrin: Okay. Yeah, we just ran a survey of the U.S. population, 800 adults, about communications preferences and found that… we asked people, what do you prefer? Written texts, audio, video, or no particular preference and consistent with what I think the conventional wisdom is people largely preferred video.

And so it was just a reminder to me that we gotta make sure that, one, we’re producing content in ways that people want to consume, but then also making each piece of content as accessible as possible.

Lee Aase: Yeah. The other thing related to that is, yeah, people prefer video and some people prefer text, and some people, and also would like to be able to zoom through it more quickly, because one of the things people do is the 1.25 or 1.5 speed on the video sometimes to just get through them more quickly, videos and podcasts. Not this one, of course they’re going to want to catch every second of it and totally enjoy all of it, but…

David Shifrin: Pull your car over, pull up the car and get the notepad out. I think this is gold here, folks.

Lee Aase: Yeah.

But the other part is that people like to…and there’s something about, especially if you have an extended video or an extended audio it isn’t, yeah, that taking notes part is a little more complicated. So that’s why we put timestamps in, lots of times, in the podcast to say hey, this is where this was talked about.

And so incorporating that I think in some of the video descriptions is a winner.

David Shifrin: Cool. And I’m taking this section a little bit long, but I will mention, because you mentioned transcriptions, and two platforms that I’ll highlight…actually three, and let the secret out. One is otter.ai. It’s great for meeting notes. You can sync it to your calendar, and it does a really nice job. It’s more for just general meetings rather than content production, but it does a nice job and it has live real-time transcription. And the other one that we’re recording this on right now, the platform that we use for remote video and podcast production at Jarrard is riverside.fm.

And ask my colleagues, I talk about it probably more than I talk about my own family, which is concerning, but it’s a great platform and not too long ago, a few months ago, they now have an option with some of their packages where you can get a transcription of your videos.

And so what we’re doing, everything you’re hearing right now is recorded remote with really high quality, and we can pull transcripts. So there’s that. And then the last one that I’ll mention, which is what I use to edit these podcasts, also has a video editing feature, is Descript that and has an outstanding transcription service that’s built in.

And that’s what I do. But it’s a really nice way to scroll through, both for production and then taking that, converting it to subtitles, whatever it might be.

So the tools, to your point, Lee, are out there, and they’re not expensive.

Lee Aase: Absolutely. Yeah, that’s great stuff. And that’s application for me just in our clinic that we’re starting cause I’m the chief administrator, CEO plus the social media guy, for now. And so being able to have some of these tools that can make that production more streamlined—that’s stuff I’m taking away, too.

David Shifrin: Alright Lee, so for the last section, we also in a previous episode talked about how executives can think about their personal presence on social media, both as individuals and as representatives of the organization.

And I want to think about how marketing and digital folks and healthcare organizations can come alongside their leadership, their executive teams, to support them. So I guess the question here is, what is the role of healthcare marketing in first supporting CEOs, and then helping the organization through leadership, transitions, things like that?

Lee Aase: Yeah. I mean, I think, so part of it is, the CEO is one of the chief assets of the organization and, as the face and the voice of the organization and obviously as a driver of the strategic direction. And being able to harness that voice and being able to accomplish what the strategic goals of the organization are is what being the CEO is all about.

So there are some who are naturally inclined toward that, and then there are others who are obviously good communicators in business communication and active and being able to accomplish their work, their will through the organization, but they might need a little help, might need a little handholding in terms of how to be most effective in their use of these social platforms to represent themselves and the organization.

And so I think just making, considering the CEO communication as a pillar of the overall strategic plan and then figuring out how to harness that by, for instance, video, we talked about how video’s been a big part of the topic, but in our experience with our clinic, we’ve got Dr. Dave Strobel, who’s a 30-year physician. Does a great job explaining things to patients, but if he were to…I don’t want him to be on social media, like I don’t want him to be personally doing it, but yet if I can capture video of him doing descriptions, explaining things and then do some post-production, it’s really good work, but you know, really elevating the value that they can contribute.

Really harnessing that and then adding the right people to do the editing to present that authentic voice, but then also to do the bird-dogging to say, hey you’re getting some reaction to this and calling them in to be able to comment as necessary so that there is that authentic level of engagement that’s meaningful instead of it…if it feels too polished, then it’s not going to have the effect, either. I mean, most of the reason people get into these CEO roles is because they’re good with people. They’re good at communicating. They can help move things along. And the digital and social is just a way to supplement that.

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In Change Management, High Stakes, Quick Think, Strategic Positioning

When Hospital Executives Move On

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Note: This piece was originally published over the weekend in our Sunday newsletter. Want content like this delivered to your inbox before it hits our blog? Subscribe here.

The Big Story: Hospital CEO exits nearly double this year

“Twenty-nine hospital CEOs exited their roles in the first three months of this year, nearly double the 15 chiefs who stepped down from their positions in the same period of 2021.”

What it Means for Healthcare Organizations

(four-minute read)

The doctor is in. But the CEO may be out.

Whether due to retirement, ouster, opportunity or entrenched burnout, we’re in the midst of significant turnover at the top levels of healthcare.

Even before Q1 2022, healthcare executive turnover was high: The hospital sector had the fourth-highest number of CEO exits in 2021 of 29 industries evaluated in a 2021 year-end report from Challenger, Gray & Christmas. The study also found that hospital CEO departures were up 11 percent relative to 2020.

Why? There are a few possible contributing factors…

  • Burnout. This one always rises to the top these days. The pressure of shepherding hospitals through the most phenomenally challenging years in modern healthcare history took a toll on CEOs.
  • Bowing out. Many CEOs were approaching retirement age at the time of the pandemic. Yet they held off to maintain continuity through the extended crisis. Now they’re deservedly on the golf course.
  • Bottom line. Q1 finances were ailing and the outlook is uncertain. “Inflation concerns have some boards looking to new leadership to weather the coming storm,” said Andrew Challenger, whose firm ran the numbers on CEO departures referenced in the articles above.
  • Distance. Many CEOs were less visible during the pandemic due to the frantic nature of the work. With less CEO rounding and few opportunities to gather as a system, the separation between leadership and staff only increased. This wouldn’t necessarily directly cause an exit, but could erode support for the exec.
  • Hospital M&A continues apace. Elsewhere, hospital closures are happening. That could mean more movement, and perhaps musical chairs with fewer spots.
  • The lure of the new. Amid all of this is the attraction to new opportunities outside of the four walls of the hospital. PE money is flowing, and good talent is in demand outside of the acute care setting.

Those are some “whys.” Now let’s flip the script and consider executive transitions, as, well… an opportunity. An opportunity for the board and other leaders to evaluate and retool; an opportunity for the new leader to bring new ideas. If you’re staring down – or anticipating – an executive transition, here are just a few opportunities and challenging either/or options people will be considering, whatever their vantage point – on the board, in the C-suite or leading a marcom team.

For Boards:

  • Imagine the organization’s life after COVID-19. Then ramp up with a leader who understands the likely characteristics of healthcare’swinners and losers.
  • Debate between retrenchment and adjusting to encompass more transformation and creativity.
  • Weigh whether to bring in an outside candidate with fresh perspective but less context, or an internal one with institutional knowledge but possibly a narrower perspective.
  • Look for candidates with some risk tolerance. They’ll need it for this new era of healthcare. The person stepping into the vacancy will have a long list of priorities and a chance to not only adjust course for the organization but also potentially help reshape an industry.
  • Use the organization’s communications pros to help the board turn vision into a cohesive story that bolsters support for the transition internally and in the community.

For Executives:

  • Listen first and intently throughout the organization and community to understand and connect with hearts and minds before making bold moves.
  • Balance the financial and operational imperatives, mandates from the board and the opportunity to make changes – or double down.
  • Educate the board on opportunities for change and ideas for adjusting the organization’s strategic vision.
  • Bring context to clinicians, staff and the community about the challenges of today and the importance of making key moves in time that benefit tomorrow.

For Marcom Leaders:

  • Help the new CEO and leaders to push the board to think in new, positive ways about transformation and consider questions that start with, “What if we…”
  • Encourage leadership to evaluate, reinstate or rethink how they interact with various stakeholder groups, particularly when it comes to in-person collaboration and events.
  • Seize this moment to assess every aspect of the organization. Find the stories that showcase where things are headed and help leadership explain to employees and the community why transformation is necessary and how they can be involved.
  • Know that even without a leadership transition, now is a good time to refresh. The past two years have been traumatic, and marcom should help the organization ask the questions, “Who are we today?” “What do we value?” and “How do we work together?”
  • Take pride in the critical role that the communications team plays in carrying the emotions of team members through a challenging time. The win? Ensuring people feel optimistic about what’s next and their ability to tackle it.

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.

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In High Stakes, Quick Think, Strategic Positioning

Post Q1 Woes – Picking Future Winners and Losers

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Note: This piece was originally published over the weekend in our Sunday newsletter. Want content like this delivered to your inbox before it hits our blog? Subscribe here.

The Big Story: Rising expenses at hospitals are unsustainable, AHA says

Prior to the pandemic, hospitals spent about 4.7 percent of labor expenses for nurses on contract travel nurses. That figure grew to about 39 percent in January, according to AHA report. The current trajectory for hospital expenses isn’t sustainable.

“The dramatic rise in costs of labor, drugs, supplies and equipment continue to put enormous pressure on our ability to provide care to our patients and communities,” AHA President and CEO Rick Pollack said in the statement.

What Comes Next

It was a dismal first quarter for healthcare providers. Of course there are some hospitals andhealth systems that are in a better spot, getting good marks from Fitch and Moody’s. But on the whole, the numbers have been bleak.

Today, we’re looking at forces currently pushing and pulling the industry and inevitably reshaping the provider landscape. The definition of success here is both idealistic and practical. It is both financial viability and the ability for a system to appropriately deliver on its mission to care for patients. We know the balance sheet must add up, and your CFOs need a clear path to sustainability, but ideals are also good.

So, let’s put the numbers aside for a moment. What will it take for healthcare providers to evolve successfully for the future?

  • The hospital becomes the center of acute care, and little else.
  • Delivery of care takes place in varied settings, from specialty outpatient clinics to the local grocery to the patient’s home to the patient’s texting app.
  • Specialization and expertise will become the watchwords, with health services companies stepping in with innovative, flexible services and private capital contributing resources and a keen operational eye.
  • Partnerships will also become more varied and collaborative, with the new hospital working in tandem with other types of healthcare organizations to provide a distributed, yet efficient and high-quality patient journey.

Certainly, there’s a long way to get from today’s messy Point A to an idealistic Point Z, but a shift in what constitutes risk and a willingness to undertake hard change will be critical to sustainability – and maybe allow your CFO to sleep better at night.

Here are our bets on what factors will contribute to a system winning or losing in the new healthcare ecosystem.

Healthcare Winners

The core trait of a healthcare organization that will make it through is a recognition that creative transformation is less risky today than taking a defensive posture. Remodeling, not rearranging furniture, is needed to establish sustainable models of care going forward. Other aspects the winners should consider:

  • Value-based care. Fee for service is predicated on, well, services. No volume, no revenue. The decade-long push towards value has likely reached a tipping point when there’s no other option.
  • Alignment, not employment. Hospitals are looking at offloading physician groups to PE-backed companies and entering operating partnerships to ensure continuity of care without having their employment contracts on the books. It’s one form of streamlining the labor issue where each entity can focus on managing that which it is best at.
  • Private capital. Beyond just staffing models, many traditional provider organizations are looking to sell non-core services like labs and even some specialty practices like orthopedics and cardiology to get them off the balance sheet. Meanwhile, PE is ready with capital to deploy and operational expertise to ensure quality of care and financial sustainability.
  • Scale. Certainly, the ability to centralize operational departments – revenue cycle and the like – and standardize others is helpful. In addition, a smaller hospital that aligns with a large system will obviously have access to resources that can help them to stay open. Deals were down in Q1, but assuming the financial pressure continues to build, that trend could very well reverse.
  • Low debt. Enough said.

Healthcare Losers

Here, it’s largely the opposite traits. If flexibility and risk-taking wins, rigidity loses. Yes, there are some factors that are tough to control or change – like serving largely susceptible populations. But doubling down on the way things have always been done will only compound those concerns.

  • Rigid care models. Better develop that VBC playbook.
  • Susceptible populations. Serving a population with a high proportion of at-risk patients is problematic when reimbursement is difficult. The caveat is that this challenge is greater in a fee-for-service mindset. Flexibility and creativity in what it means to provide care can help mitigate this point.
  • Being all things to all people. Trying to do too much and spreading the organization too thin when resources are scarce rather than focusing on core expertise.
  • Stay the course. All told, continuing to view the hospital as the core of healthcare delivery is a surefire bet for a slide into unsustainability. Defensiveness and cost-cutting can only go so far before quality suffers and the organization is forced to offload services or shut down. Why not do that proactively and productively from a position of relative strength rather than hold a fire sale?
  • High debt. Enough said.

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.

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