HJAR Mar/Apr 2023

18 MAR / APR 2023 I  HEALTHCARE JOURNAL OF ARKANSAS the reduced supply of the healthcare work- force with its associated increase in labor cost. The same is true for independent, large, multi-specialty clinics who don’t even own hospitals. Their clinical model is largely still constrained by prevailing transaction-based financing mechanisms and a scale-driven eco- nomic model, where primary care physicians, specialists, laboratory, and imaging services are all co-located and organized around as large a production volume as operational processes will allow. Operational efficiency becomes the driving force for most business decisions, which means relatively short appointments and a one-size-fits-all approach. In an ambulatory set- ting, where time spent with patients can be the most precious of resources, the same amount of time is allocated to a healthy 18-year-old on no medications coming in for a mild problem as to a 75-year-old with multiple medical prob- lems, on multiple medications, who is coming in with multiple concerns while also in need of follow-up for chronic condition management. Compounding the problem, current transac- tion-based healthcare financing mechanisms are skewed heavily toward the much higher reimbursements of surgical, procedural, and imaging services than toward spending time with patients; listening to them; building trust- ing relationships; understanding their values, goals, and preferences; managing chronic conditions; and thinking through cognitively complex diagnostic dilemmas — which is ide- ally done by all providers but is essential to well-designed primary care. The result is that we end up with a skewed distribution of medi- cal expenditures — usually driven by a prepon- derance of hospital and procedurally oriented specialty care — with an excessive amount spent on managing “downstream” compli- cations that might have been prevented by greater investment in “upstream” prevention made possible by redesigned primary care. In addition to these shortcomings of tradi- tional health systems, there are indeed some bad actors in healthcare who engage in the disproportionate capture of value for them- selves over its creation for others. However, most decision-making executives of health systems are rational actors who make sound business decisions based on what will best support their mission and continued economic viability. Changing the world of healthcare be- the lives of the people they serve. The guiding mantra for hospitals and health systems has traditionally been “no margin, no mission.” The financial reality is that for health systems to achieve their mission, they must demonstrate profitable growth consistently. And tradition- ally, the economic model that best supports their business is that of “economies of scale.” In the 18th century, the modern industrial age began to take shape when it was discovered that innovations in manufacturing combined with co-locating sources of production under one roof led to the generation of previously unheard-of levels of volume, throughput, and efficiency. Like most other industries, health- care has been strongly influenced by this concept of scale-driven manufacturing. Like a factory, running a hospital or a large inte- grated health system incurs an incredibly high amount of fixed cost. Taking care of people sick enough to be hospitalized while also investing in the latest imaging technologies, performing state-of-the-art surgeries, and providing ac- cess to the newest life-saving procedures can be very capital-intensive and expensive work. And since health system executives have a fi- duciary duty to the bond holders that fund their capital projects, to the boards of trustees that govern their operations, and to the com- munities that depend on their round-the-clock availability, it is quite understandable why the metrics that matter most to these manag- ers are predicated almost entirely upon mea- suring volume, throughput, and efficiency. As outlined in the book, Tilt: Shifting Your Strategy from Products to Customers , by Naraj Dawar, the primary strategic ques- tion of any scale-driven business is, “How much more stuff can we sell?” Amortization of fixed cost, quest for new markets, and de- cisions related to competitive strategy all are derived from that single question. And when the payment model is transaction-based, the most important measure of economic suc- cess is all related to the volume of goods sold or services delivered, which in healthcare is number of patients seen, number of surger- ies performed, and so on. Not out of greed. But rather out of economic survival. Hospital and health system margins have been erod- ing steadily for years, thus jeopardizing their mission — a condition worsened precipitously by the pandemic and further exacerbated by In the last issue of this journal, we talked about the aspirational goal — our “moon shot” — of changing the world. Our ancestors of the 20th century overcame pandemics, wars, and economic hardships to help make the world a better place than the one they inherited. In- spired by their courage and conviction, we must envision a future where our health systems will continue to heal the sick and alleviate suffering but one that will also transition toward improv- ing health of individuals and inspiring healthier communities. Likewise, we must acknowledge and learn from the mistakes of the past, so they are not repeated or propagated. We must make care more affordable for everyone, over- come health disparities by delivering care more equitably, and fulfill the ultimate potential of our healthcare workforce to reconnect with the deep sense of purpose that drives them, all or- ganized around delivering the health outcomes that matter most to the people we serve. And if I, personally, have been on a quest for anything, it has simply been a quest to find an organization that has the vision to chart the course to that future state and the means and expertise to embark on the journey that gets us there. The organization must have a group of visionary leaders who can envi- sion such a future, must be characterized by teamwork that is full of diversity and inclusiv- ity of thought, and must be bold and coura- geous enough to embrace risk, because the path is fraught with peril of economic danger that comes with entering uncharted territory. The overarching “why” is clear, so now we need to start exploring the “what” and “how.” WHAT NEEDS TO CHANGE? In the words of noted executive leadership coach and author, Marshall Goldsmith, “what got us herewon’t get us there.”And in thewords of the Nobel Prize winning physicist, Albert Ein- stein, “insanity is doing the same thing over and over and expecting different results.” And yet, healthcare in the United States has largely em- braced the same economic model for decades. The overwhelming majority of people work- ing in healthcare — including hospital and health system executives, administrators, doctors, nurses, therapists, and other sup- port personnel — are smart, dedicated, well- intentioned individuals who come to work ev- ery day striving to make a positive impact on