Dispelling the Consolidation Myth: Key Habits of Highly Effective Hospitals

Heather Lavoie, MBA, CEO
Heather Lavoie, MBA, CEO
Illume Advisors

Octave Leadership Advisory Services is pleased to share a guest blog by Heather Lavoie, the CEO of Illume Advisors. Lavoie has a 35+ year tenure leading start-ups, health plans and provider organizations, directing initiatives on strategy, transparency, diversification, product innovation, operations and analytics. She is a serial entrepreneur, data geek, athlete and health zealot, whose work has always been grounded in strong business fundamentals. She spoke at Octave Leadership Advisory Services Leadership 2022 Conference in July 2022.

To read part one of Lavoie’s blog, Dispelling the Consolidation Myth: Key Habits of Highly Effective Hospitals, click here. In part one, Lavoie writes about the current market conditions and trends that challenge the future of community hospitals.

In lieu of consolidation, the most effective hospitals:

1. Plan and act strategically

Highly effective hospitals conduct a formal process for strategic planning, not once every five years, but every year given the pace of market and regulatory changes. A solid process should not only include data from the latest community health needs assessment, but comprehensive service line data about market share, leakage, yield under existing contracts, operating financials, and qualitative data from key stakeholder interviews: patients, employers, businesses in community.

Highly effective hospitals have a comprehensive understanding of the market and regulatory forces, and of themselves. They understand patient, employer and community needs and wants, their individualized situation, comparator performance and current and emerging competitive threats.

They establish and then regularly but thoughtfully iterate market, financial and operational plans. Hospital margins are too thin, and the market moves too quickly for this to be a once per year occurrence. It needs to be revisited quarterly to stay on track, applying course correction where necessary.

2. Collaborate to gain economies of scale and specialized know-how

Highly effective hospitals collaborate. They cannot have a go-it-alone attitude. Instead, it is in the opportunities that are afforded through collaboration where they find the potential to reduce costs, avail themselves of services and technologies or are able to deploy service lines that might otherwise only be available to the largest systems.
Examples include:

Leverage shared services for specialized functions such as revenue cycle, contracting expertise, technology, group purchasing and operations. If negotiating your Microsoft licenses is both a burden and costly, then maintaining cybersecurity expertise, maximizing reimbursement yield across payers, negotiating contracts and establishing a discipline around analytics and population health is quite often beyond the reach of many independent hospitals.

Collaborate to gain access to or share fractional FTEs for specialty and subspecialties, enabling hospitals to maintain or expand services in the local community, ensure continuity of care and address transportation issues and convenience to patients.

Form affiliations to maintain local control, where shared governance or management might be in place, and services and decision-making still rest with the local community and the hospital board of directors.

3. Leverage data

Highly effective hospitals leverage data to:

Understand sources of outmigration and referral patterns. This allows them to perform service line adjustments, manage referrals across the community and provide for continuity and a call back to community when care must leave for acuity or access reasons. They leverage data for provider and community education, quantifying the quality of care rendered and the value of the services they provide.

Analyze their patient population for missed opportunities in care, generating revenue and improving performance in payer incentive programs.

Understand payer yield and evaluate coding practices under contracts, ensuring that no money is left on the table.

Model future opportunities for revenue enhancement.

4. Invest in revenue-enhancing technology and services

Effective hospitals also directly invest in revenue-enhancing technology and services, whether that be in a collaborative model or as a shared or licensed service, including:

Telehealth and remote patient monitoring,

Outreach, engagement and case management,

Appointment scheduling and

Revenue-cycle management.

Hospitals invest to achieve parity with the largest systems, but also to address patient needs and wants. They keep abreast of innovations in the market and thoughtfully model the potential returns as well as potential market erosion if they fail to invest.

5. Maximize reimbursement under existing contracts

6. Pilot on themselves

If there is anything a hospital understands well, it is its own employee base, particularly through the lens of the employee benefit plan and associated costs. As such, leveraging that employee base to test new service offerings mitigates the investment and operational risk, and puts the hospital in a strong position to fail fast or iterate based on early results. Before bringing a plan to market for employers, a hospital could offer a domestic insurance plan, test new services and iterate and pilot risk-sharing and techniques to manage the population that could translate into larger payer contracts.

7. Foster relationships with local employers

The most effective hospitals foster relationships with local employers, an effort that can be a natural extension of working with members of the Board who represent local employers, but also formal outreach to executives and benefits managers at organizations. This community building helps to make the case for the value of in-community care, provides for early signals when employers are considering benefit changes that might draw patients out of community or establish sites of service for care. It also provides fertile ground to work on issues of common interest such as collaborate to improve quality or provide important access.

Effective hospitals proactively communicate quality performance data, key value points and educate on service offerings. I am also aware of hospitals and an employer or group of employers that directly collaborated on employee messaging and outreach and on quality performance and care coordination activities. Fostering a strong relationship with employers can also prove fruitful as hospitals leverage the voice of the employer in payer contract negotiations.

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