Thoughts from Ken Kaufman
In his 1623 work On the Advancement of Learning, philosopher Francis Bacon wrote, “A prudent question is…one half of wisdom.”
Or, if you prefer something more recent and more pragmatic, scholar Edward Hodnett wrote in his seminal 1955 book, The Art of Problem Solving, “If you don’t ask the right questions, you don’t get the right answers.”
As I speak with hospital and health system CEOs and other executives around the country, the sense I get most frequently is the chaotic state of the current environment. If we are to believe Bacon and Hodnett, leading through this state starts with translating the various elements of the current environment and each organization’s condition and circumstances into a set of critical questions…and then answering those questions in a way that provides a roadmap for organizational strategy through unprecedented and unpredictable times.
To begin the process of shaping today’s seeming chaos into a set of leadership questions, let’s identify several critical areas of leadership challenge.
One critical contemporary hospital leadership issue is the deliberate deterioration of the healthcare safety net, including the erosion of the Affordable Care Act (ACA) and the uncertain future of the Medicaid program. HCA announced recently that the congressional failure to continue the ACA subsidies will result in a reduction of $1 billion in HCA revenue and that the HCA payer mix has moved in an unfavorable direction. HCA’s announcement points the hospital industry in a very stressful direction financially, programmatically, and clinically.
Hospitals also face the combined issue of scale and consolidation. The American economy is again tilting toward scale—an overall competitive environment that requires size, large and growing revenue, very significant cash flow, and growing capital capacity. It seems likely that these general macroeconomic trends will transfer toward hospitals specifically. Further, the deterioration of the safety net and overall payer mix is likely to drive further hospital consolidation in the near future. How should hospital leaders assess the minimal and desired levels of scale necessary, and evaluate critical consolidation decisions going forward?
Finally, hospital leaders face innumerable decisions around AI, which at this very uncertain moment should be directed by the CEO with Board oversight. It seems obvious that AI is emerging as a force multiplier, but it is not clear at all whether that force multiplier will be for a positive or negative outcome.
Now, on to the resulting leadership questions.
There is an art to asking a good question. Good questions are stated clearly and require clear responses, often based on quantitative evidence. Good questions are probing; they may start with “what,” but move quickly to “why,” “how,” and “what if”? Good questions also invite responses that could be uncomfortable.
Following are a few suggested questions for leaders pertaining to the core leadership challenges I’ve outlined.
How are you modeling the potential effects on your organization of changes to society’s safety net? What is your organization’s level of vulnerability to those changes? What is your tolerance level for changes in payer mix resulting from individuals less able to use the health marketplace and Medicaid for insurance? What effects might accrue to the organization operationally and strategically? What are your organization’s options to replace lost revenue? How can your organization continue to fund its strategies? Have you mapped out these scenarios and discussed their desirability, timing, and implementation with the executive team and board?
How do you plan to lead the installation of AI at your hospital? What are your AI objectives: lower expenses, increased revenue, improvement of access and clinical quality? What will your technical decisions be: Anthropic, Open AI, less-expensive Chinese options, or eventually build your own (highly recommended by Adam Karp of Palantir)? How will you react to the unexpected cost of the AI journey? Bob Sternfels, CEO of McKinsey, recently said, “For companies that mistake AI’s greatest value as cutting costs, this moment will be painful. For those willing to bet on equipping good staff with extraordinary technology, this is a golden opportunity.”
How does your organization feel about scale? What level does your organization occupy on the competitive ladder? Can you be successful remaining on that point on the ladder? Does your organization need to make changes to program and clinical mix, and is the organization currently capable of making such changes? If hospital consolidation accelerates, is your organization a buyer, a seller, or neither, and how will you make that determination in a timely enough way so that you are ready to move before competition for deals heats up?
Today, there are more questions than answers for hospitals.
That is not surprising. Answering complex, probing questions is hard work in any situation. If we follow educational psychologist Benjamin Bloom’s well-known taxonomy of educational objectives, we should respond to questions with analysis, synthesis, evaluation, and application. When the questions, and their implications, are as elusive, complex, potentially unpalatable, and difficult to act on as those facing hospitals, coming up with such answers is especially formidable.
I would suggest several considerations as hospital leaders, having formulated their key questions, undertake to answer them. One is to involve the right people at the right time. Include people with both analytical and creative minds, people with the specific expertise required, and people who represent key stakeholders, and involve them at the right stages for analysis, synthesis, evaluation, and application.
Another suggestion is to attack the discussion in such a way that opinions that fall outside the conventional wisdom can be shared. That means not only inviting broad perspectives but creating an environment in which people feel comfortable sharing such perspectives.
Also, honesty will be critical. An organization’s long-standing culture may suggest one type of answer to a particular question or set of questions, but a forthright examination of the evidence may suggest that very different answers need to be considered.
When thinking about how to answer complex questions, we would do well to return to Francis Bacon, who is generally credited with articulating a systematic philosophy of empirical inquiry. Bacon suggests that the ideal process of inquiry is incremental, deriving “axioms from the senses and particulars, rising by a gradual and unbroken ascent, so that it arrives at the most general axioms last of all. This is the true way.”
Ultimately, finding answers to these complex healthcare leadership questions will be a continuing process of examination and exploration, requiring a combination of evidence, creativity, and courage. The well-run hospital organization will welcome the opportunity to objectively consider the most difficult of questions and then set overall strategy from the best and most thoughtful answers.
Managing Director, Founder
As one of Kaufman Hall’s founding partners, Ken Kaufman has provided the nation’s top healthcare leaders with expert counsel and guidance since 1976. He is recognized as a leading authority on healthcare macro trends, with his areas of expertise spanning strategy, finance, financial and capital planning, as well as mergers, acquisitions and partnerships. Ken offers deep insights into the economic,...
