Managing the Productivity, Enterprise Risk of Strategy (Coach Series, Part 1)

U.S. health systems face increasing pressures on price, service, customer experience, asset efficiency, performance, total costs of care and strategic asset productivity.

U.S. health systems face increasing pressures on price, service, customer experience, asset efficiency, performance, total costs of care and strategic asset productivity. These pressures have accelerated industry consolidations — mergers, acquisitions and related integration activities.

There are about 1,850 health systems operating in the United States. Within the next decade, this number is expected to be reduced by half. More than 65 percent of all physicians in the United States were expected to be employees of health systems and other large, corporate health providers in 2017.

Competition for a shrinking health dollar will encourage the provider-side of the industry to pursue more complex strategies, which will increase the level of “enterprise risk” assumed by health systems. Enterprise risk encompasses the full set of risks inherent in the design and execution of organizational strategies.

Strategies and tactics will impact the design and delivery of direct patient care. It is not a stretch to state that absent the active involvement of physician leaders, U.S. health systems will put at risk the value of their market reputations, their financial stability and perhaps even viability.

Strategy, Risk and the Connection to Physician Leader Accountabilities

All organizations have a strategy in play, whether planned or not; having no strategy is also a strategy.

On one end of the spectrum, there is a philosophy of “no formal strategy required.” Here, leaders may believe “we all know what to do, we just take care of patients.”

On the other end, strategy and the management of strategy is a well-honed art and science, refined to a point where the C‑suite is staffed by an experienced chief strategy officer supported by sophisticated staff and analytics.

The purpose of strategy is action that produces required organizational performance. The action of strategy is tactics. Tactics serve defined objectives, such as:

• Penetration of markets and share performance in markets, which could be geographic, clinical, demographic and socioeconomic markets, or specific customer and payer markets.

• Financial performance, including balance sheet performance; directing strategy for building the balance sheet strength and an organizational financial performance overall as it positions for a next round of public financing.

• Recruiting and retention of quality staff; attracting and retaining talent required to execute strategy.

• Productivity and performance of assets and people, including improving and optimizing output of high-cost facilities and technology assets, as well as professionals and professional teams.

• Competitor positioning performance, including creating favorable positions in the mind’s eye and in competitive markets.

• Quality and safety performance, including strategies that create cultures of quality and safety; cultures of high-reliability and repeatable high performance.

• Payer contracting and relationship performance, including positioning to access or retain favorable contracts with insurers and other third-party payers.

Strategic Frontiers Will Challenge Organizations

Emerging needs will encourage U.S. health systems to take on new strategic frontiers. Among them:

• Managing population health and the health status of attributed populations.

• Accepting financial risk for attributed, (contracted) populations.

• Creating integrated provider networks of affiliated, coordinated collaborative, efficient and loyal providers that are sufficiently broad and deep.

• Ensuring sufficient brand loyalty of target, strategic populations.

• Delivering demonstrable value for the health dollar spent.

• Following through on implied brand promises of quality, safety, coordinated care, affordability and exemplary customer experience.

• Guaranteeing acceptable access across a system of care.

• Delivering on consistency of care, within a clinical service line across multiple geographic sites and over time.

• Increasing productivity of expensive strategic assets such as high-cost technologies and specialized facilities).

Stated strategic goals may not square with the performance potential of the organization. Strategic plans — and related goals and aspirations — do not always align with an organization’s ability to fund or execute on required tactics. In other words, organizations are unable to deliver effectively on the demands of the strategic plan.

Poorly managed or undermanaged strategy exposes organizations to excessive levels of enterprise risk.

It is wise for senior physician leaders to be intimate with the design and execution of organizational strategy; especially the point where tactics intersect with patient care and care management

Daniel K. Zismer, Ph.D, is a founder and managing director of Castling Partners, an advisory and consultancy focused on strategy performance and integrative risk management for health and health care organizations. Zismer has a 30-year career in the leadership of health care organizations and executive education. His area of specialization is strategy and the performance of strategy. He is the Wegmiller Professor Emeritus, School of Public Health, University of Minnesota Programs in Health Care Administration.