A Different Future – Part III Prescriptions for Public Facilities

In Part I of this series, I described what I believe to be the major challenges facing public hospitals in an environment in which all or most US citizens and legal immigrants have some form of health insurance. Apparently, my comments offended some of the leaders of our local public hospital system who, I assume, interpreted my thoughts as an attack upon them. Nothing could be further from the truth. I work in the emergency department at Lyndon B Johnson general hospital and I love doing so. I work with a group of talented and dedicated nurses who are the equal of any emergency nurses anywhere. I have spent lots of time with the administrators at the Harris County Hospital District and they too are dedicated people who are trying to deliver health care to a large group of needy people on a limited budget. But, I do stand by what I wrote: public hospitals, the Harris County Hospital District facilities included, do have long waits for some services and most people who have the resources to choose another option do so. It is rare to find a public facility that can effectively compete for the insured population. I’m told that the Bexar County Hospital District in San Antonio was, at one time able to do just this but I cannot verify that. Why is this? I can only guess that a combination of image, location, and amenities work against public facilities. This is odd when you consider that most of these facilities are affiliated with excellent medical schools and have a top-flight faculty. And yet, the very words “county hospital” carry a negative connotation with some people.  In fact, some parts of our country no longer have publicly funded hospitals. Those died with the advent of Medicaid. Even in Texas, when the SCHIP program started, there was a marked decline in the number of children seeking care in the public hospitals. With Medicaid, they could see the same doctors, pediatricians from Baylor College of Medicine and the University of Texas Medical School, at private hospitals (including one that has a McDonald’s restaurant right in the building!)

I also stand by what I wrote about culture change. In order to compete in the new world of healthcare, public hospitals will have to change their entire cultures. It’s not that culture change will be difficult for public hospitals in general or for the Harris County Hospital District specifically; it is difficult for any organization. The pages of the American business literature are littered with the bones of failed change efforts. Human cultures can be amazingly powerful. In the book that elevated him to uncontested “guru” status, Built to Last, Jim Collins and his partner Jerry Porras describe the power of culture when they write a vignette about a person who goes to work for that customer service icon, Nordstrom’s. After a few months of working there, he finds that he just doesn’t fit in with the hard core “Nordies” and he leaves. Note that he isn’t fired or counseled, he just doesn’t feel comfortable around people who drank the Nordstrom’s Kool-Aid. That is how cultures, whether positive or negative, perpetuate themselves and can do so despite the best efforts of dedicated managers who want things to be different. Public hospitals have built cultures that work in their current environments but may not work when they have to go head to head with hospital organizations that have spent years learning how to compete with one another for a fixed pool of patients who have the resources to pay for their healthcare.

So if anyone in a public hospital asked me to help them figure out how to succeed in the new world of healthcare (and no one has asked, but hey, it’s my blog) what would I tell them? First I would tell them that they absolutely must start the process of changing their cultures now. They have to begin rewarding the behavior that they want from their employees and actively eliminating those who do not fit with the new cultural vision. This will be gut-wrenchingly hard and painful but I believe it is a critical success factor. Then, I would tell them to consider one or more of the following strategies.

1. Become the low cost provider – There is no shame in being the low cost provider. Walmart and Southwest Airlines have successfully used this strategy to become among the most successful companies in the world.
   1. Why this might work – In a phrase: “high deductible plans”. If reform efforts force employers to insure their entire workforces, many will choose policies with a high deductible because they are cheaper. These plans offer employees some protection against financial ruin in the case of a catastrophic illness but they also place the responsibility for the first several thousand dollars of healthcare costs squarely onto the employee himself or herself. These plans come in two types. The most basic type of plan leaves it to the employee to figure out how to cover the deductible portion of his/her insurance but I expect to see an expansion of tax-deductible health savings accounts and flexible spending plans in order to fill this need. The other type of plan gives the employee a health savings account as a part of his or her compensation. Money unspent at the end of the year belongs to the employee. In either case, high deductible plans should make many people begin comparison shopping for healthcare. Public hospitals are used to delivering healthcare in a resource constrained environment and, in many cases; they own their facilities outright so they can operate at a somewhat lower overhead than their competition. They might be able to offer a range of services at attractive prices and draw price-conscious patients to their facilities.
   2. Why this might fail – Success as the low cost provider of healthcare depends upon patients have some “skin in the game”. If they do not have to pay a significant portion of the cost of the services, they will be far less concerned with costs. Also, an alternative to the high-deductible plans, might be to have insurance companies, negotiate with various kinds of facilities for the best prices. While this might also seem to favor public hospitals, the managed care era taught us that people are all too willing to rebel and to involve elected officials when they feel that a greedy, unfeeling, insurance company is trying to control or limit the services they receive.
2. Become the convenient provider
   1. Why this might work – Many of those who are currently medically indigent will see their lives improve dramatically when they have health insurance, but coverage will not solve all of their problems. For example, they will still have to afford transportation to and from healthcare facilities. If they have a choice between the private hospital across town with its expensive parking garage and cafeteria and the public hospital near home, they may well choose the latter but only provided that they believe that they are receiving equivalent care. That is certainly good news for Houston’s public facilities because the medical providers are affiliated with city’s two medical schools.
   2. Why this might fail – To borrow a phrase from the real estate world “ location, location, location”. The public hospitals must be conveniently located in order for this strategy to succeed. For HCHD, the news is mixed. Ben Taub hospital is no more or less convenient than any of the other hospitals in the Texas Medical Center but LBJ is relatively isolated from other hospitals. It has the potential to become the provider of choice in that part of the city.
3. Become a niche provider, especially a niche provider of services deemed necessary by the public. Every year, when the citizens of Maryland register their cars, a portion of their registration fee goes to support the R. Adams Cowley Shock Trauma Center, a freestanding trauma center that serves the entire state of Maryland and parts of contiguous states and the District of Columbia. The people of Maryland want first class trauma care and they understand that such care is expensive so a portion of each automobile registration helps to preserve this vital community resource.
   1. Why this might work – Even when everyone has insurance, such facilities are likely to exist and are likely to remain publically supported. The key will be for these facilities to position themselves as important to everyone, not just the poor. A trauma center can do that; you can wreck your Maserati just as easily as your ’85 Pinto and just about everyone knows someone who has sustained a severe injury.
   2. Why this might fail – Institutions that try to make the case that they are necessary charities may not fare so well.