Keeping Focused on Business Support in the Midst of Industry Transformation

In two recent Executive Team meetings, one of the big topics was our overall financial performance. The good news was that three quarters in, we are ahead of budget. That is really good news and we should take a moment to celebrate. There has been a ton of work done across the system to continue to manage our costs as we continue to experience consistent declines in utilization. We saw a steady decline in 2013 in inpatient volumes as a system. The first three months of this year, however were startling. Our volumes "same store year-over-year" were down even above the 2013 trend. There was a lot of discussion about what is going on and what is driving this. There are a lot of things driving changes to the way people are consuming healthcare. The Affordable Care Act, Medicare reform, Healthcare Exchanges, and Medicaid expansion are chief among the drivers. What was very interesting coming into this calendar year was that the eastern half of the US experienced one of the worst winters in recorded history. It seems easy to draw a connection between the harsh weather and a drop in volumes. It feels logical to assume that people are just less likely to leave the house in such harsh weather unless they really have to. Many of our Health Ministries exist in areas that did experience a harsh winter. However, we have recently heard from health system CEOs from the west coast and western US that they are seeing exactly the same drop in volumes. So what is going on? Is this our new normal? There were a record number of companies that moved to High Deductible Health Plans (HDHPs) in 2013 that became effective Jan. 1 2014. Industry data says that 1 in 5 people now have an HDHP and that is expected to grow. We are beginning to see the impact of this on how a person changes their consumption of healthcare. The long and the short of it is that people are just not going to the doctor unless they absolutely have to. Most HDHPs have deductibles between $1,500 and $5,000 per year. There are some as high as $15,000. People with these plans are very reluctant to use healthcare unless something catastrophic occurs. We participate in an industry that is experiencing unprecedented change. As we look at the numbers, it is clear that we need to become even more proactive in managing our costs to match the volumes. That is a tough thing to do. Some think that our experience in our third fiscal quarter (Jan-Mar) was largely influenced by the weather. Some don’t; I am in that camp. I think the weather was a coincidence that lined up with the start of a huge number of people with HDHPs on top of all of the other changes. We will see as our fourth quarter unfolds. Our financial performance has never been more important than now. Because we are in a time of change, we need to sustain our current Fee For Service capability (that requires capital investment), while we build our ability to delivery Fee For Value and Population Health capability (that both also need capital investment). So how do you fund all of these important capital projects? We need to generate cash; or as it is called, "cash available for capital". We need to do this better than we ever have before, as there are more demands for investment to keep the existing engine running while we build a new one. To round that out, we have to perform better financially to generate the cash available for capital to fund two distinctly different sets of needs – all the while our industry is fundamentally changing and consumption is dropping faster than ever before in history. It underscores the importance of what we are doing with shared services at the Ministry Service Center. This transformation is so fundamental to what we must become; a single national ministry with a very different cost structure and delivery capability. As an organization, we must continue to leverage our scale and reduce costs that don’t impact patient care. [inlinead] NOTE: Lee heads Ascension Health's Ministry Service Center, which is in the third year of a six-year implementation for all healthcare entities in Ascension, the largest not-for-profit health system in the United States. By the end of calendar year 2014, the Ministry Service Center will support 150,000 associates as clients across the US. MSC is also in the early stages of supporting other key initiatives within Ascension, such as the creation of a unified travel services division and physician back-office services. The Ministry Service Center was the winner across two categories in SSON's 2014 Shared Services Excellence Awards: once for "Culture Creation", and a second time for "Improvement and Innovation." About Lee Coulter: Lee Coulter has had an impressive career, and is broadly considered one of the leading Shared Services practitioners in North America today. Now in his 8th industry, Lee was previously Senior Vice President of Global Shared Services at Kraft Foods and a leader of Kraft’s corporate wide "Organize for Growth" transformation initiative. In this role he implemented shared services in nine global functions, delivering support across more than 70 countries and completing major outsourcing transformation "mega-deals" in IT, HR, and facilities management. He created and led the Shared Services Center of Excellence and the Outsourcing Center of Excellence at Kraft. While there, he also received Chairman Roger Deromedi¹s CEO Award for his efforts. Prior to joining Kraft, Lee served as Vice President of Infrastructure Services at AON Corporation, where he implemented ITIL and shared services, reduced costs by more than 35%, and integrated legacy infrastructure from a long acquisition strategy, finally outsourcing IT to CSC. Lee spent 15 years with GE in a multitude of roles culminating in VP of GE’s outsourcing business. He also spearheaded the Company’s global Y2K initiative and served as a technical and operating executive in its Healthcare Services business, including as an expatriate in China. He received the President¹s Award from GE CEO Jeff Immelt. Lee holds a BS in Electronics Engineering from DeVry University and has completed all course work for a BS in Electrical Engineering and a Masters Degree in Biomedical Engineering at California State University at Long Beach. When not leading MSC, Lee can be found in his workshop, making sculptures out of wood and stone. He will be writing a weekly column for SSON's website in which he will share (nearly) everything that comes across his desk these days. More from Lee next week...

Keeping Focused on Business Support in the Midst of Industry Transformation

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