Why do two-thirds of American Hospitals Lose Money or Barely Break Even at the Operating Line?

Through my long career I have observed the divergence of American hospitals into the prosperous and the “have not’s.” Why? On occasion it is clear. There are two subsets of hospital failure easy to understand. Some hospitals simply should not be open. When the St. Francis Hospital of Pittsburgh closed in 2002 . . . it was barely mentioned in the local newspaper. At one time it was the largest hospital in Pittsburgh with over 1,000 beds. It simply worked itself out of being needed. It was sad, but inevitable. And, of course, there are those hospitals in communities that are very poor and, yet the hospital is desperately needed. Many of these hospitals are rural and their loss would be devastating to a needy community. What about the remaining hospitals that fail to thrive?

The answer to the puzzling question of hospital failure is becoming clear. Many hospital board members and hospital executives reach into the jaws of victory and find failure with fundamentally poor judgment and decision making.

I have made my own share of terrible decisions in my career, but have normally been supported by boards of directors to avoid disaster through good oversight and internal controls. It turns out that all hospitals are not as fortunate.

Recently, I received a phone call from a young lady in our research department and advised that she had stumbled upon a small multi-hospital system blowing approximately $4,000,000 per annum right out the window through a simple error that could be easily corrected by making a small change. As it turned out, I happened to nominally know the CEO of the hospital system. I called him on the phone and suggested we meet. At my own expense and time, I flew 1,100 miles, rented a car and drove to a restaurant to meet him. He was absolutely delighted at this revelation. His little system is suffering seven figure operating losses on a monthly basis. Four million dollars would go a long way. He was going to rush back to the hospital and share this great news with his flagship hospital CEO.

I will admit that my motivations were not derived entirely from the cup that holds the milk of human kindness. In healthcare consulting, sometimes if you do something “good” for a hospital or health system, it will be remembered when consulting services are needed.

Well, what happened in this situation? Finally a phone call came and it went something like this: “Jan, I checked in with my Hospital CEO and he does not want to make this change at this time and I support my people.” I was more than a little surprised. I said, “But Fred (name changed for obvious reasons), there is no cost, the numbers are not in dispute and your hospital system will lose $4,000,000 on a recurring annual basis. How could you possibly not do this, there is no downside and you receive four million dollars annually without any pain?” His reply went like this, “Well, my style is to show my people support by supporting their decisions . . . even when they are wrong.” My colleagues, this kind of “decision making” takes your breath away.

I am reminded of the American novel, The Grapes of Wrath, by John Steinbeck. In a novel that documented the tragedy of drought and famine in America’s heartland in the 1930’s, there is an exchange between the agent of The Shawnee Land and Cattle Company and a farmer who is having his farm repossessed. The farmer, Muley, said to the agent, “Do you know who owns The Shawnee Land and Cattle Company?” The agent said, “It ain’t nobody. It’s a company.”
The farmer’s son said, “They got a President, ain’t they?” The agent said, “Oh son, it ain’t his fault, because the bank tells him what to do.”

This kind of circular reasoning leads to decisions that are not in the best interests of America’s hospitals, and other organizations for that matter.

In another circumstance we offered a 10:1 ROI to a struggling hospital in the Pacific Northwest. Yes, it sounds too good to be true. So, to demonstrate confidence, we offered a money back guarantee. The hospital CFO thought it was too expensive. Wait a minute. How could it be too expensive if there is a money back guarantee and a 10:1 return on investment? How could that be too expensive? You know what is coming. The CEO told me he supports his people and they really appreciate his support. My opinion is they REALLY appreciate his support.

Facing a similar dilemma some twenty years ago at the Millard Fillmore Health System in Buffalo, New York, I shared with a group of board members that I wanted to support my management team, but I just could not stomach a recommendation being forwarded to me for an affirmative decision. The former Chairman and CEO of the Dunlop Tire and Rubber Company put his arm around me and whispered these words in my ear. “Jan, you are running a university affiliated hospital with lots of research laboratories. Would you turn the laboratories over to the monkeys? Sometimes you have to grab the steering wheel and follow your best experience and instincts. There is no upside in blindly supporting stupid decisions.” It is a lesson many hospital leaders and hospital board members need to learn.

These are only two data points in hospital and health system decision making. Notwithstanding, there is an indisputable pattern of poor decision making in many of America’s hospitals. The rules of the road, reimbursement methodologies (public and private) are so similar and yet the results among hospitals and health systems are so different. Success is rooted in good decision making. Failure is rooted in poor decision making. I have a keen perception of the obvious.

Jan Jennings

Republished with permission of Atlanta Hospital News

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Picking a “Well Seasoned Consultant” May be More Dangerous than “Eating Beef Jerky”

This month our firm celebrates its third anniversary. We have had a lot of fun, grown rapidly, made a few mistakes and have enjoyed remarkable success.

It is always risky commenting on the consulting skill of other firms. So, at the outset I should disclose that we have several dozen consulting partner firms from whom we have benefited greatly from their instructiveness, sound leadership and commanding knowledge. They are often in a position to offer expertise that is not within the spectrum of services offered by American Healthcare Solutions. Further, we have enormous respect for many of our competitors with whom we have no relationship. There probably has never been a deeper and richer pool of consulting talent in the healthcare industry.

We do, however, still bump into consulting firms that bill themselves as “well-seasoned.” This term of art is often a euphemism for tired and old approaches to solving new problems in healthcare. “Well-seasoned” is, however, a nicer term than “old goat.” “Old” today is less related to the age of the consultant than is the freshness of thought within their minds and hearts.

Originally used to describe food, “well-seasoned” draws my attention to “beef jerky” and “Virginia ham.” Both are rather expensive, loaded with more chemicals than a waste disposal system and heavily laden with fat and salt. The routine consumption of these food items is not generally considered good for your health; directly related to hypertension, as a minimum.

One should look carefully at the ingredients of a “well-seasoned” consultant; the following characteristics are bad signs:

• If your consultant thinks advanced computer skill is in some way related to e-mail . . . you may have a “well seasoned” consultant.

• If your consultant gets glassy eyes when you request a multi-variant predictive algorithm utilized in productivity management . . . you may have a “well seasoned” consultant.

• If your consultant thinks supply chain management is picking the right GPO . . . you may have a “well-seasoned” consultant.

• If your consultant cannot tell you every link in the revenue cycle from the doctor scheduling the operating room from his office to the investment of cash receipts from net patient care . . . . you may have a “well-seasoned” consultant.

• If the pictures of the consultants on their website (if they have one) looks like the bulletin board introduction photos of clients in a local nursing home . . . you may have “well-seasoned” consultants.

• Seriously, while there are endless lists of indicators, if you open the invoice from your consultant and the dollars charged take your breath away . . . you may have a “well-seasoned” consultant. Stated somewhat alternatively, if the invoice challenges your “gut” regarding the value received for the dollars charged . . . you may have a “well-seasoned” consultant.

As a practical matter, a consultant should only be retained against the same criteria generally utilized for hiring a new member of an executive team:

1. They can do something you do not have time to do.

2. They offer expertise that is needed and otherwise unavailable within the organization.

It is this latter category of consulting where “well-seasoned” consultants tend to struggle. The “well-seasoned” consultant that has skills garnered in the 1970’s or 1980’s is frequently missing an entire body of knowledge that has emerged in healthcare administration in the last generation. Certainly experience is an important factor in selecting a consulting firm but is the firm at the cutting edge of quantitative and qualitative analytical technologies and knowledge?

The best “well-seasoned” consultant I know is a fellow in his mid 70’s by the name of Paul Long. He is semi-retired, was a senior leader in the former Hunter Group and has an extraordinary pedigree of finance related accomplishments in some of the best hospitals in the United States. He stays current with the latest developments in healthcare administration and healthcare finance, in particular, and has penetrating judgment and integrity. His conclusions are based on deep data analysis, a balance of competing forces within an organization, and a commitment to deliver value to the client. We wish we could secure his services on a full-time basis. I do not have his permission to use his name in this missive . . . so I am likely to take a finger-wagging for telling the truth about him.

We also see young people coming into the field with remarkable skills and abilities typically over the pay grade of the generally available “well-seasoned” consultant. These young people own the future of healthcare consulting. Integrating their knowledge and analytical skill with more senior, but competent, talent is the trick for obtaining best value in healthcare consulting.

So, there you have it. When you retain a healthcare consultant, be careful. These dollars should be spent judicially. If your consultant cannot exceed your expectations and raise the performance bar for your organization, you may have purchased the “beef jerky” and “Virginia ham” of healthcare consulting . . . well-seasoned. On the one hand your feet should not swell, but your blood pressure may rise.

Jan Jennings

Republished with permission from the Hospital News Group

Popularity: 3% [?]

It was a busy morning, approximately 8:30 AM, when an elderly gentleman, in his 80’s, arrived to have stitches removed from his thumb. He stated that he was in a hurry as he had an appointment at 9:00 AM.I took his vital signs and had him take a seat, knowing it would be over an hour before someone would be able to see him. I saw him looking at his watch and decided, since I was not busy with another patient, I would evaluate his wound. On exam it was well healed, so I talked to one of the doctors and obtained the needed supplies to remove his sutures and redress his wound. While taking care of his wound, we began to engage in conversation.

I asked him if he had another appointment this morning, since he was in such a hurry. The gentleman told me that he needed to go to the nursing home to eat breakfast with his wife. I then inquired about her health. He told me that she had been there for awhile and that she was a victim of Alzheimer’s disease.

As we talked, and I finished dressing his wound, I asked if she would be worried if he was a bit late. He replied that she no longer knew who he was and that she had not recognized him in five years. I was surprised, and asked him, “And you still go every morning, even though she doesn’t know who you are?” He smiled as he patted my hand and said, “She doesn’t know me, but I still know who she is.” I had to hold back tears as he left. I had goose bumps on my arm, and I thought, “That is the kind of love I want in my life.” True love is neither physical nor romantic. True love is an acceptance of all that is, has been, will be, and will not be.

The happiest of people don’t necessarily have the best of everything; they just make the best of everything that comes their way.

An Anonymous Nurse

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We certainly would not send them a bill for poor care…or would we?

Last year I was visiting with a friend, a highly recognizable name in healthcare. He conveyed a personal story of a surgery performed that went horribly wrong, leaving his vision in one eye forever damaged. When the surgical mistake was “diagnosed,” it was the surgeon himself that brought to light his shortcomings. In a glib tone, he admitted his “hand slipped” and that this issue was detailed in the consent form. He promptly sent a bill to the appropriate health insurance company as well as to the patient for the co-pay expenses. As a result, the hospital where the surgical error occurred took a negotiated discount from charges as payment in full for the procedure.

The Hospital CEO — well, he thought the surgical outcome was really “unfortunate.” The surgeon was disappointed; he said this case was one of only three times in his career he had permanently damaged a patient’s vision. No one thought an apology was in order. Both men are extremely well educated and trained, mannerly and respected in their professions. Both men would even apologize if they accidentally bumped into a little old lady in the grocery store. Permanently damage a man’s vision, and no apology is in sight — no pun intended.

In October, 2006, Newsweek published ten case studies directed toward fixing America’s healthcare system. The first case study was “Facing Up to Mistakes.” A patient of Boston’s Brigham and Women’s Hospital relayed her nightmare of enduring a cardiac arrest when an anesthesiologist injected a routine nerve block and everything went wrong. The patient intuitively knew that something horrible had happened and felt betrayed by the hospital for not being candid with her about her adverse medical event. The anesthesiologist wrote the patient, accepted responsibility for the mistake, and apologized. As a result, the hospital developed a new system of patient safety. The patient offered her forgiveness to the doctor and, more importantly, said, “I felt like I had my life back.”

Not everyone gets their entire life back, even when they survive poor care. In December, I received a letter from a woman who read an article I had previously written and published with regard to hospital-acquired infections.

Mrs. Johnson offered the following story pertaining to her husband’s care (Mr. Johnson) following a laparoscopic colon resection at Alamo General Hospital. Forgive me for changing the patient’s name and the hospital name. Aside from all of the legal problems such a disclosure would unleash, it would also detract from making this central point: Patients are routinely injured or killed in American hospitals; no one apologizes; the hospital, physicians and surgeons bill the insurance company, and, if necessary, the patient or family is sent a bill for co-pay obligations. It is not possible to make up this stuff.

Mr. Johnson opted for a laparoscopic colon resection because the risk of infection was lower. The surgeon informed Mr. and Mrs. Johnson that the surgical procedure was a “success.”

Notwithstanding, Mrs. Johnson was concerned. With no training in medical or hospital care, she perceived the nurses were understaffed and overworked. “There were simply not enough “hands” to cover the surgical floor most of the time.” All hospital personnel were courteous but frazzled.

There were hand sanitizers in Mr. Johnson’s room, and Mrs. Johnson noticed that nurses and physicians frequently washed their hands. They did not always wash their hands; but after all, they frequently washed their hands. Aside from observed hand washing irregularities, Mrs. Johnson noted numerous unsanitary practices; most caused by the sense of chaos on this surgical nursing floor.

Here are several direct quotes from Mrs. Johnson. “In a matter of a few days, there was something not quite right going on in the area of his incision. As his discomfort grew, he began complaining of pain and nausea and was eventually given some medicines allowing him to be able to rest. Since it was evening, I went home for the night. Little did I know that the next day would prove to be the real beginning of the nightmare.”

“By the time I arrived at Alamo General the next morning, my husband was in severe pain and fighting a spiking temperature. Since it was the Easter weekend, staff was really limited. Eventually, the nurse and I had a talk, and I demanded that a doctor look at my husband. I was not going to allow this to go unchecked.”

“The doctor who finally came to check in on my husband (at the nurse’s insistence) barely looked at the wound site. He was nice, but he was not as concerned as the nurse and I. He tried to assure me that there was nothing unusual about the situation. He did not convince me.”

“My husband continued telling the nurses of his concerns that evening and throughout the night; but upon standing up from his bed the next morning to go to into the bathroom, he felt that his gown was wet. When he looked down, he watched as a bloody pool formed on the floor at his feet. A nurse who was passing by his door saw what was going on and quickly attended to him.”

“Shortly thereafter, three doctors were in my husband’s room, the young doctor from the day before being one of them. With scissors and nothing to numb the wound site, they proceeded to reopen the wound which produced more puss and fluids than they were able to contain with the handfuls of gauze they had brought along. Right there, on the hospital bed, in a very non-sterile setting, my husband’s very infected wound was treated. It almost caused him to lose consciousness and almost caused me to completely lose my temper.””I became the one who had to pack the wound, administer the medication and change the dressing for the next month.”

“The health care professions are demanding, indeed. But when there are not enough nurses and nursing assistants on every shift, there simply is not time to employ the proper procedures for fighting infections. The visitors to the patient rooms must also be involved and educated on the prevention of spreading germs to the patient. It cannot be left entirely to the nurses and the physicians.”

Mr. and Mrs. Johnson finally left the hospital. As Mrs. Johnson started to drive her husband home, they both noted a banner hanging on the front of the hospital proclaiming that the hospital was one of the top 100 hospitals in the nation or words to that effect.

In closing, Mrs. Johnson said, “My husband recovered, though he still suffers with pain occasionally. As he likes to say, “I had to get out of that hospital before they killed me!” His sense of humor is still intact.”

Indeed, Mr. Johnson might be that one unlucky hospital patient in twenty that acquires an infection as a consequence of being admitted to a hospital. Here are several pertinent facts. Mr. Johnson was otherwise healthy when he arrived at the hospital. He did not have an infection when he arrived at the hospital. He acquired a life threatening infection while in the hospital. No one apologized or even offered a single word of regret. All hospital bills were submitted for payment with dispatch. Mr. and Mrs. Johnson have never contacted an attorney and do not intend to sue anyone. They are just thankful that Mr. Johnson is still alive.

Having conducted interviews with several dozen hospital CEO’s (not very scientific or statistically reliable), they think Alamo General Hospital is the norm and that Boston’s Brigham and Women’s Hospital is the outlier. Among other things, they point to the advice and counsel from the hospital attorneys. Admit nothing. In 1970 there was a memorable movie by the name of Love Story. Torturing the most famous line from the film, “Providing poor patient care is never having to say you are sorry.” The American hospital may not always be able to provide the best care. One element of reform that Newsweek had right is we need to be able to face up to our mistakes. While it is easier said than done, it still should be done. If we are to maintain the reservoir of goodwill that the “Johnson” families of America extend to us, we will need to face up to our mistakes sooner rather than later.

Jan Jennings

Popularity: 3% [?]

On Tuesday, October 25, my mother-in-law entered a prominent Pittsburgh hospital to undergo a routine surgical procedure. She was at the hospital to have cataract surgery performed. Before getting into her situation, the following factual information should be disclosed.

This year, great medical newspapers, like the Pittsburgh Post-Gazette have reported that nearly 2,000,000 U.S. citizens acquire an infection as a consequence of treatment in a U.S. hospital and that 90,000 people die as a consequence. The average hospital infection rate is five percent of all hospital admissions. The death rate is higher than the death rate of breast cancer. A copy of the official report can be found in an online newspaper: www.governing.com.

So, back to my mother-in—law. I must say that each person who treated her and prepared her for surgery was very nice to her. Each staff member was courteous and respectful of this 84 year old mother, grandmother and great-grandmother.

In the interest of time, let me focus on the pre-operative observations. One nurse, to be delicate, was ministering to the needs of her nose with her fingers and hand. She immediately went to a man and administered eye drops to his eyes and then to my mother-in-law to put in her eye drops. All three procedures were ungloved, done in rapid succession; no hand washing was performed. As a matter of fact, not one nurse nor employee in the pre-operative setting wore gloves as they prepared a group of patients for surgery. Another nurse had an interesting pre-surgical technique. She reviewed the medical record of each patient by putting two of her fingers in her mouth every time she turned a page in the medical record and then, without washing her hands, pulled back the eye lids of an elderly gentleman to examine his eye and surrounding tissues. Another nurse had something; ironically, bothering her eyes and rubbed her eyes with two fists and then, without washing her hand or wearing gloves, continued to touch the tissues surrounding the eyes of the patients being prepared for surgery.

Why did I not say something to someone in charge? Here are several lame excuses:

1. I knew my mother-in-law would have been uncomfortable with me complaining about her treatment, just before going to surgery.

2. Even though this is a form of “Russian Roulette”, I knew the odds were in her favor. Nineteen of twenty patients escape the American hospital without an infection.

3. Somewhere in my base fears was the anxiety that someone would retaliate or insult my mother-in-law because of my complaining.

4. Last, and the most honest answer, despite all of my bluster in writing, when the chips were down, I was gutless to say something in my mother-in-law’s defense.

I am truly ashamed. I love my mother-in-law. She has been feeding me for nearly forty years.

So, why are healthcare personnel so sloppy when it comes to the most basic and, perhaps, the most important infection control technique - hand washing.

That answer is deeply rooted in a very simple explanation. Hospital organizations are generally not organized or managed to change the culture with respect to infection control. How can I be so sure? Well, you do not have to go very far in Pittsburgh to dismiss two myths about infection control:

Myth # 1: Infections are an inevitable consequence of interacting with the American Hospital.
Allegheny General Hospital has provided national leadership in demonstrating that the impossible can be attained in eliminating hospital acquired infections through a commitment to patient safety and process improvement. Their achievements are well documented, and the leadership of Allegheny General Hospital does not need me to tell their story. They are among a growing number of hospitals that are fighting back against cultural norms that permit sloppy infection control practices.

Myth # 2: Nurses and physicians are too busy to wash their hands.
In many hospital settings, this is not a myth. Nurses are frequently sent out to do the impossible without appropriate support, tools or training to be effective in their advocacy for the patient. A recent feature article in Newsweek singled out the nursing leadership of UPMC Shadyside Hospital for fundamentally reorganizing nursing to eliminate the sense of chaos so often experienced by practicing nurses. And, the nurses and nursing leadership at UPMC Shadyside Hospital have not stopped in their efforts to continue improving the working conditions for nurses at the hospital. Guess what? The nurses not only have time to wash their hands, they have time to wash their hands properly.

No, the unnamed Pittsburgh hospital was not trying to kill my mother-in-law. The nurses involved in her pre-operative care would be shocked to read this. They were nice people working in a hospital that has established low expectations for them.

My mother-in-law had a favorable surgical outcome as expected and did not acquire an infection. One in twenty mothers-in-law is not so lucky.

Republished with permission from the Hospital News Group

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