A Key Determinant To Organization Success or Failure…

On St. Patrick’s Day, our firm celebrated its fifth anniversary. It has been an interesting journey. We have served hospitals and healthcare organizations from sea-to-shining- sea, large and small; hospitals extremely well-managed and hospitals still trying to find their way. After serving or visiting dozens of hospitals, and before studying the data, you quickly develop a sense for the hospitals that are winning and those that, well, are still wandering around.

Three decades ago, the Dean of the School of Business at Duquesne University, Pittsburgh, Pennsylvania, coined the expression that “management” could be defined briefly as “getting things done through others.” Such an expression succinctly captures the complexity of delegation of responsibility within an organization. In general, the winning organizations that we observe have a system or delegating responsibility that works effectively. It is a combination of art and science. Joe Schmedlap, Chief Operating Officer of St. Smithers by the Swamp, in Broken Arrow, Oklahoma, has a system of delegating responsibility without losing control of the departments for which he is ultimately responsible to the Chief Executive Officer. He receives regular reports and measures success and occasional slippage within each department or cost center assigned to him. He seems to have a sixth-sense for when things are going well and when a department is floundering. It is more than pouring over reports and data. A lot of it comes from the tone and tenor of the human interactions between him and the incumbent department head.

It is not complicated. When you ask a department head a series of questions and clear crisp and enlightened answers snap back, you develop a confidence that the department manager has effective control over his area of responsibility. Indeed, it is within these organizations we normally find success by most any measure.

Unfortunately, we occasionally find a Chief Executive Officer or Chief Operating Officer who substitutes “abrogation” for “delegation.” One definition of abrogation is, . . . .” to treat as nonexistent.” In these circumstances there is a detachment between the “executive” and the “department head.” I refer to this as the “Pontius Pilate Syndrome (PPS).” Why should I preside over this issue when I can leave it to mob rule? PPS can be either active or passive.

Active PPS: We collect data with respect to productivity standards and present it to Augustus Caesar, Chief Operating Officer of the Walking Wounded System of Meandering Medical Centers, in God Lost Her Shoe, Mississippi. He seems to be listening attentively and then he utters these fatal words, “Take this information to my department heads and let them do with it as they will. I support my management team and I depend upon them to do their jobs.” I will pull them together and you can present these data to them and I am confident they will do the right thing. Upon further questioning, “Do you want us to get back to you with the result? The answer, “If there is anything that I need to know I am confident my department heads will bring it to my attention. I support my management team and they support me.”

Passive PPS: We collect data with respect to productivity standards and present the information to Melvin Milk-toast, Chief Operating Officer at Sinking Fast Medical Center, Off the Beaten Path, Minnesota. Before we can present the data, he makes it clear that productivity data is confusing and creates anxiety for his department heads. Rather than confuse the department heads with information and data he would prefer a ten percent across the board cut in full-time equivalents every three years. It is simple and everyone understands how it works. Also, most department heads leave within three years of employment so the system of across the board cuts only affects the department heads once in their tenure with the Sinking Fast Medical Center.

Hospitals in which there is rampant abrogation of responsibility by top management suffer several common outcomes. It does not matter if the hospital practices Active or Passive PPS. These characteristics are as follows:

• These hospitals routinely lose money.
• The department heads focus on finding a new job.
• The Board of Directors grows increasingly restless.

Allow me to put all of this into sharp contrast with hospitals where effective delegation is practiced. Delegation is defined as, “to commit (powers, functions, etc.) to another as agent or deputy.” The department manager feels empowered to do his/her job with the effective mentoring and coaching of a leader. At Snappy Valley Medical Center, in Sharp Focused, Oklahoma, there is a regular flow of information in both directions between the Chief Operating Officer and his department heads. There are regular private and group meetings within the “management team.” There are common characteristics of those within hospitals who deploy effective delegation systems. They are:

• These hospitals routinely have positive results from operations.
• The department heads are taking on progressively higher levels of responsibility.
• The Board of Directors has enormous confidence in the management of the hospital.

These are but a few observations made over the past five years. The most startling observation is how deeply embedded these divergent practices are enforced within hospitals. Organizational culture seems to have a life of its own and it is powerful. Well-run hospitals show a deep curiosity for information to advance the good purposes of the institution. Poorly run hospitals avoid, even punish, managers who challenge the status quo.

For the reader of this missive there is the obvious question. Is your organization involved in systematic delegation or abrogation? The answer matters. On a more personal level, which type of hospital do you serve? Your answers, whether open or anonymous will be greatly appreciated.

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Healthcare leaders have been predicting universal healthcare insurance for at least the past 25 years. It has been a long vigil and we will probably wait longer. Only in the last few months have the trends that will propel us into universal healthcare insurance become clear, at least to me.

1. The economic pressure of caring for the uninsured - Some of our best clients are now caring for up to 15% of their patients in a category known as “self pay.” This is a euphemism for uninsured or under-insured. These so-called “self pay” patients can equate to less than 1% of cash receipts to a hospital or health system. To provide an example, assume a hospital provides identical care to 100 patients. 15 of those patients pay less than 1% of the cost to care for the entire 100 patients. We see many hospitals and health systems installing the most elaborate management systems to squeeze every nickel out of hospital budgets in an effort to break even from hospital operations. These are hospitals that have historically shown 4 to 6% of revenue in excess of operating expenses. At the moment, this trend is highly variable from one community to another. To the extent that this trend increases and becomes a national norm, the hospital industry will be emboldened to scream for help in a manner never experienced in our history.

2. The Federal Budget - One of my favorite hospital CEO’s is a Marine Corps Officer. He recently said to me, “No one could question my patriotism, but our $9 trillion national debt and $12 billion per month for the war is going to eventually have to be paid for and you know where Congress will look first?” For all of our protestations regarding the Balanced Budget Act of 1997, the medical and hospital industry survived. It is not clear to the public or the members of Congress that Medicare and Medicaid cuts might be harmful to the healthcare industry. It is just a matter of time before the healthcare industry will face a Federal Balanced Budget Act II or Act III or Act IV. Eventually, the bone marrow of the healthcare industry will be ruptured and lead to the third and most disturbing force for change.

3. Elevated Quality Standards will fail -We have all read about one medical disaster or another. In the past, each of these errors has been attributed to medical errors or the most elemental, human mistakes. Many of these errors have occurred at our nation’s finest medical institutions. During the past 20 years there has been an explosion of interest in elevating quality of care standards. People like Dr. Donald Berwick have convinced us that we can avoid human error and improve the care provided within the American hospital. This ethos is under-girded by one simple assumption: the healthcare delivery system has adequate money. I am a believer. However, it is altogether possible that an under-funded medical and hospital system will begin reporting medical disasters on a par with the national “death-o-meter” of wartime statistics. What will the public reaction be if 15 years from now the American Hospital Association begins issuing a weekly report with headlines like the following, “Last week 93 people died in American hospital emergency rooms due to excessive waiting times.” It is altogether possible that an under-funded healthcare system will voluntarily ration elective surgeries as life threatening cases have to be handled first. Will the life threatening cases be handled in a timely manner? Of course, there will continue to be wide variability with respect to which hospitals are most adversely affected.

As these 3 trends fully mature, there will be a period of placing blame. When American people are being injured or worse in American hospitals, regardless of their insurance status and despite the best efforts of physicians, nurses and hospital leaders, it will be hard to argue against a level playing field for all Americans. If the American hospitals are uniformly under-funded, the problems that emerge will not be isolated to St. Smither’s by the Swamp Medical Center in Broken Arrow, Oklahoma. Under-funding any complex system does not discriminate on any basis. An engine without oil will destroy a new Lexus just as fast as a used Yugo.

I asked my most trusted reviewer of my articles to review this one. He openly wondered if I was being a little melodramatic predicting that medical and hospital care is going to fall off a cliff or “was I just having a bad day.” Well, you tell me. I see these changes coming with the speed of a turtle and immutable. My adverse vision is way off in the future. I have no idea how long it will take for routine crashes in American hospitals to occur. I would ask the informed reader this simple question; do you see a single countervailing force to reverse any of the 3 trends suggested herein?

At the moment, 5 out of 6 American people have some form of health insurance. When that number gets to 4 out of 6 or 3 out of 6 and the Federal budget chisels the life literally out of the American hospital, medical disasters will become normative. No pun intended, the American public will not take this lying down. We are likely to see a state experiment that works. Currently, we are watching the “Massachusetts experiment” carefully. The early signs are not promising. Stay tuned. Many innovative proposals are out and about.

Our universal healthcare system is likely to be extremely private. The Federal and State governments will continue to contribute to a system that is competitively bid among private health insurance companies. We will likely catch up to world powers like Mexico and competitively bid our pharmaceuticals when public dollars are involved. Ironically, it is from the politically ambitious that we are likely to find the champions for universal healthcare insurance. When people die routinely and unnecessarily in American hospitals, it will be expedient to be a legislative hero.

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On this last day of January, 2008, I was tasked with the pickup of a prescription for a dear old friend. It could not have come at a worse time. I was struggling to meet a timetable to catch an airplane out of town.

I stood at the “prescription pickup” station at the pharmacy and I waited and I waited. When I inquired, “what is the problem,” it was revealed that the pharmacy computer was having difficulty chit chatting with the health insurance computer and approving partial payment for the medications prescribed. Finally, I asked if I could pay cash for the medication and let the computers fight it out in the days to come. Well, nothing speeds up a transaction like cash. The bill for thirty pills was $159.95. I was a little surprised at the price and asked the pharmacy technician if she ever had patients show up with a prescription without insurance and when faced with the price, turned down the medication. She looked at me straight into my eyes and said, “Mr. Jennings, every morning, every afternoon and every evening.”

Upon further questioning she shared with me that patients routinely turned down insulin to battle diabetes, diuretics to fight congestive heart failure and routine medications to control high blood pressure, to name a few. Of 300 million U.S. citizens, nearly 50 million have no health insurance. One in six Americans face choices the majority of us find unthinkable. Who are these people?   We provide Universal coverage for streets and highways. All 300 millions Americans have access to our road system. It is considered a public utility. Even if you do not have an automobile, you can walk along the highways and byways of America. We have chosen as a society not to refer to this reality as socialized highways. Our society views highways as a service that all citizens should have made available to them and road construction companies compete for the business and are paid to build and re-build these highways for our individual and collective benefit.

Would it not make sense for America and Americans to find a way to pay pharmaceutical companies to provide medications that promote life, health and improve the quality of life for all of our citizens. For American business, would this not improve productivity, reduce lost work days and serve the interests of business and industry. There is someone out there in cyberspace that will read this and accuse me of being in favor of socialized medicine, a new expletive in our lexicon.   Rotary International provided universal access to polio vaccine to every person in the world. They raised the money on their own and developed a distribution system for polio vaccine to essentially eradicate polio throughout the world. If you have ever attended a Rotary meeting, you would not come away from the experience thinking of these men and women as wide-eyed flaming liberals or socialists. They saw an opportunity to improve public health throughout the world and filled a long-standing international leadership void.

Where will the leadership come from to provide healthcare to our citizens as a public utility. I have no interest in socialized medicine. I am not even certain what that term means. It strikes me that our friends throughout Western Europe have found numerous models to finance medical care in ways that are universal and at the same time, extraordinarily private. This subject frequently causes people to start yammering about the Canadian Healthcare System. I can honestly say that in almost forty years of service to the American healthcare delivery system I have never met one person who advocates that America follow the lead of the Canadians in anything but hockey. 

My guess is that the leadership will emerge to bring common sense to this issue. It is not American for many of our best citizens to be embarrassed in American pharmacies; to shrink away in embarrassment because they cannot afford a simple medication to enrich or extend their lives. 

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Resistance to Change
The human impulses related to change is probably as old as our knuckle dragging ancestors. Presented only as English literature, there is an interesting 2,000 year old story in the New Testament Book of Mathew. The setting for this story is the village of Gadarenes. Theologians only agree that the town was on the eastern coast of the Sea of Galilee. Because the villagers were herding pigs, it is thought the villagers were Greek, or possibly Roman. As Jesus entered the town, he was threatened by two mentally disturbed men. The response of Jesus was to heal the two men of their mental illness. It seems like good news; maybe not. Jesus was promptly asked to get out of town. Yes, the status quo had been altered. The villagers had accommodated themselves to their mentally ill villagers. People hate change; resist information that will lead to change; even when that change might lead to a new and more favorable set of conditions. In two thousand years, nothing has changed.

Our firm had a short misadventure representing a nationally recognized group purchasing organization (GPO) in a small geographic territory. What a waste of time, money and effort.

Yes, we went from hospital to hospital proclaiming the good news. We were evangelists for cost savings. We did not ask our audience to accept our message by faith. We were armed with eighth grade math. The numbers used are only an example:

• GPO # 1 – 32,000 items times an Average Cost of X = Total Supply Spend = $ 37,342,334

• GPO # 2 – 32,000 items times an Average Cost of Y = Total Supply Spend = $ 32,123,654

• St. Smithers by the Swamp Medical Center Savings . . . . . . . . . . . . . . . . . . . . $ 5,218,680
=========

Yes, we represented GPO # 2. The message was largely unwelcome. The most interesting, if frightening example was a female supply chain executive who reviewed the “facts and figures” and came out of her office screaming at the top of her lungs, “We are not interested in changing GPO’s, I don’t care what the savings are, get out of our hospital.” She was “bug-eyed”, her face was red as a tomato and we estimated her blood pressure at 200 over 120 (stroke range).

Most stories were less interesting. One CEO said they were not going to change GPO’s because his hospital system makes decisions based on “facts and figures” and that was the basis of his discriminating determination. We found this to be an odd response. One step in the process the CEO scrupulously avoided was the review of the “facts and figures.” Go figure. As it turns out, this CEO was ingratiating himself to his staff by supporting their recalcitrance.

One of the executives related to GPO # 2 provided me with a window into one understandable reason to resist switching GPO’s. There is a one time cost in time and effort, however small, to switch from one GPO to another.

There are other reasons not to change:

• The supply chain executive is generally not given any incentive to recommend a change that would lead to thousands or millions of dollars of hospital savings. It just sounds like a lot of extra work. Further, it may be well understood internally that the CEO is “drinking the “Kool-Aid” from the resident GPO.

• The hospital “supply chain” operations are, perhaps, the least intensely managed department of the American hospital. This is rooted in a deep tradition of not wanting to be tagged with the responsibility.

• GPO’s are extraordinarily solicitous of their existing customer base to lock in undeserved loyalty. Strategies and tactics include meetings (away from the hospital grind) with outside speakers, golf, tennis, tickets to professional sports events, lavish luncheons and dinners and on and on. In 1970, folk rocker Stephen Stills captured this phenomenon best with his song, “Love the One You’re With.”

• Notwithstanding my eight grade math example, GPO’s morph in ways that make them somewhat difficult to compare. Difficult but not impossible. More work with no reward for the effort. Each GPO is laden with bells and whistles that are intended to differentiate themselves from alternate GPO’s or obfuscate meaningful comparisons.

It would be disingenuous not to acknowledge that our firm may not be very good evangelists for change. We speak truth to power. There are many hospitals that do seek meaningful solutions to existing challenges. There is little time to suffer hospital leaders willing to squander scarce hospital resources for all the wrong reasons. Yes, some things never change.

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Nicholas Jacobs, President and CEO, Windber Medical Center

Over the past thirty-five years I have met so many great healthcare leaders. I will avoid mentioning twenty or thirty of them because I would be neglecting twenty or thirty others. Some of these great leaders have been close working partners; others have been ruthless competitors. Some have been dear friends; others have been nominal acquaintances. I never thought I would know one healthcare executive that stood tall above the rest. That has changed.

In 1999 I attended a family gathering in a little hamlet outside of Johnstown, Pennsylvania. At the time I was working as a healthcare consultant. I was introduced to a fellow by the name of Nick Jacobs and was told he was the CEO of a rural hospital in the area: Windber Medical Center. I never heard of it. We talked about his activities and his hopes and dreams for his 80 bed rural hospital. Some of what he said was so “fantastic” I wondered if he was completely bolted down. There was no bragging or horn blowing; he just talked about his quest to make healthcare better than it had ever been before.

Several years later I had the opportunity to serve Jefferson Regional Medical Center in Pittsburgh as President and CEO. The culture of Jefferson Regional Medical Center was strikingly like every hospital I had ever served. It was all about diagnosis, treatment, throughput, science, new technology, finances and quality management. It was not the best hospital I had ever served and it was far from the worst. Like most hospitals, it was decidedly “vanilla.” There was one program referred to as the “Spiritual Life Department” that was truly special. It reminded me of my year’s earlier discussion with Nick Jacobs.

I was motivated to pick up the telephone and call Mr. Jacobs for an onsite appointment at the Windber Medical Center. I was unprepared for what I found. While Nick Jacobs is committed to the humanities, he embraces the medical sciences in every conceivable way. How many rural hospitals have the following?

• The Windber Medical Center owns and controls a research facility that is at the cutting edge of genetics research in affiliation with the Walter Reed Army Medical Center and the Genome Project. Dozens of scientists at the M.D. and/or Ph.D. level have been recruited to a facility larger than the hospital to advance genetics research and improve the future of diagnosis and treatment. Of the 126 U.S. academic medical centers in the United States, there are few that have research facilities on a par with those supported by the Windber Medical Center.

• In a separate building is a Breast Care Center designed by and for women. The center has every conceivable technological advantage available to women. More interesting is the attention to detail to the humanities. The dedication to privacy and the emotional health of the patients is striking. The facilities are breathtaking. Over its short history, Windber Medical Center has amassed the largest inventory of breast tissue through biopsy in the United States enabling the potential to advance diagnosis and treatment of breast disease more rapidly than any facility on the face of the earth.

• Mr. Jacobs became concerned about the conditions that confound patients and family at the time or near the time of death. He appealed to the citizens of the little coal town of Windber and the money was raised to build a seven suite inpatient hospice with facilities that would rival any Ritz Carlton or Four Seasons Resort.

• Concerned about the quality of life in Windber, Mr. Jacobs spearheaded the construction of a building that houses one of the most beautiful fitness centers in the United States. There is an integrated pool for therapies best suited for water therapy and a Dean Ornish Program designed to reverse coronary artery disease. The success stories from the Dean Ornish Program would bring tears to your eyes.

• Windber is a coal town, but has little coal. The population is largely elderly and the community is economically challenged. The elderly residents previously congregated in a worn and sad senior citizens center. Through a real estate and financial transaction that would make your head spin, Nick Jacobs found a way to build a new senior citizens center with the best facilities that money can buy and make it available with free parking to all senior citizens of the area.

• By the way, the Windber Medical Center has an eighty bed hospital. You will not be surprised that they have a 16 slice PET/CT, a 3.0 Tesla MRI, 4D Ultrasound, hotel styled hospital rooms and other technologies rarely found in a rural hospital.

More remarkable than the technical mumbo-jumbo, the Windber Medical Center lifts your spirits the moment you walk in the door. The hospital was one of the early affiliates of Planetree, an organization committed to introduce the humanities into the hospital and its surrounds.

Here are a few of the accomplishments of the Windber Medical Center. Volunteers bake bread on the nursing units and serve it to the staff and patients. There is a sense of “home” when you stroll through the hospital. On an entirely optional basis, patients and staff have access to the following:

• Stress reduction programs
• Aromatherapy
• Massage Therapy
• Yoga
• Pet Therapy with the “Golden Girl Retrievers”
• 24 hour visitation hours
• Musicians perform in the hospital on a regularly scheduled basis funded by the Pennsylvania Council of the Arts
• Yamaha music programs (every nursing unit has a piano)
• Acupuncture
• Double Beds in the OB Suites for overnight stay by the spouse
• Meditation Garden Behind the Breast Center
• Walking trails on the hillsides
• Birdfeeders in view of each hospice guest
• The kitchen is “trans-fat free”
• Numerous fountains inside and outside the hospital
• An Inter-faith Spiritual Healing and Meditation Program
• A Greenhouse for patients and visitors

My editor worries when my articles are too long. This is but a small window into the soul of the Windber Medical Center.

I will stop. Before I close, I want to make sure I stay in touch with reality. Nick Jacobs has faced challenges and adversity, both personally and professionally. But when you meet with Nick Jacobs you know you have stood in the presence of humility and greatness. You will not be surprised to learn that FierceHealthcare recently honored the Windber Medical Center with the “2007 Hospital Innovators Award.” FierceHealthcare is an internationally renowned digital daily newsletter published by FierceMarkets: www.fiercemarkets.com.

The greatest miracle is that his Board of Directors has been able to keep Nick Jacobs in Windber, Pennsylvania and the search firms of the United States have not been able to turn his head with money or fame. Nick, God Bless You.

Jan Jennings

Reprinted with permission of Western Pennsylvania News

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