Wednesday, August 20, 2008

Hospitals and Doctors - Physician-Led Hospital Turnabouts

An August 2 Boston Globe article “Cape Cod Hospital CEO Maps Turnaround.” opens:

Dr. Richard Saluzzo, the new chief executive of Cape Cod Health Care in Hyannis, says he plans to rebuild his health system’s relationship with doctors and create a “physician-led organization” as he seeks to turn around the cash strapped organization

Saluuzon says, “the medical staff leadership group is going to run this hospital with us. They will be actively involved in all decisions. Now there is suspicion and distrust between the doctors and the hospital. We need down those barriers.

I pray Dr. Saluzzo succeeds. Cape Cod needs its hospital system, not only for its care but as the Cape’s largest employer. Cape Cod Health Care employs 4000. In the year ending May 31, the system lost $24 million, partly because its doctors referred high-tech high-ticket procedures, like MRI and CT scans, to outside facilities. Another problem, says Salluzzo, is that system employs 33 hospitalists. For a system of 313 beds, this may be an excessive number. Until recently hiring hospitalists was considered the rage for most hospitals.

I find this story intriguing for personal and global reasons. I had a home in Falmouth for 20 years and was fascinated by that vacation-bound peninsula’s quirky economic climate. More broadly, it brings home the message that hospitals had better bring doctors into the decision-making process if they are to succeed. Doctors are hospitals’ main customers. Without doctors, hospitals would be empty shells with mediocre food.

Hospital financial failures are not rare, with Medicare revenues flattening, health plan reimbursement tightening, doctors setting up competitive facilities, and consumers gravitating to ambulatory settings. Turning failing hospital around requires;

• rallying doctor leaders around a common cause,

• attacking problems on multiple fronts (cutting staff, renegotiating contracts, collecting money owed, coding properly, restructuring debt, improving revenue cycles, enhancing productivity, bolstering morale, cutting supply expenses, building on strengths, and seizing key opportunities)

Turnarounds often succeed within one to two years:

• Maricopa Medical Center from $12 million debt to $25 million profit in a year,

• New England Medical Center from a $4.7 million loss to $400,000 surplus in year,

• Crouse Hospital in Syracuse from $91 million to in the black in 2 years,

• Detroit Medical Center from $60 million in losses to break even in two years.

One lesson is crystal clear. effective CEO and physician leaderships are absolutely essential If the CEO happens to be a physicians,that process may be expedited. In our book, Sailing the Seven “Cs” of Hospital-Physician Relationships: Competence, Convenience, Clarity, Continuity, Competition, Control, and Cash (PSR Publications, 2006), James Hawkins, a former hospital administrator, and I observed better physician relationships, even formal partnerships, will be required for future hospital viability and stability.