As 2020 nears an end, health care leaders are looking to set their strategy for 2021—but what they focus on in the coming year may look pretty different than years past.
In this episode of Radio Advisory, host Rachel Woods sits down with Advisory Board's Dave Willis to talk about what health care leaders should prioritize when setting their strategy for 2021 amid the Covid-19 epidemic, including what part of their strategic plan may look the same as past strategic plans and what might be different.
Read a lightly edited transcript below, then download the episode to hear the full conversation.
Rachel Woods: After a truly crazy year in health care, I'm sure many of you are setting your sights on 2021 and even beyond—and with a new year comes a new strategic plan. Today, I want to talk about what executives must focus on in the new year, ranging from what might be the same from years past and what might differ. To have that conversation, I've brought strategy expert, Dave Willis.
Dave, you travel often in normal times and you spend a lot of time talking to health care leaders and strategy executives, who right now are designing what their organization will focus on in 2021. Why is that process particularly difficult this year?
Dave Willis: I've been doing this for 23 years. And there's no year that I can remember that compares with this one. You've got the obvious pandemic, throw in a challenging economy, bright spotlight on the issue of health equity, presidential election, a divided Congress, and more. There are way too many crazy variables that you have to account for here.
Woods: Now, typically speaking, organizations really examine their strategic plan once a year—is that the right cadence in this new world, or has Covid-19 changed the pace for how often executives should be doing that?
Willis: I think if you asked 10 chief strategy officers that, you'd probably get 10 different answers. The nuance that I will put to it is this: Strategic planning is a lot of work, and I'm not sure that I buy into the need that it has to be done quarterly or semi-annually. But it is certainly a good time to revisit all of the assumptions baked into the last plan—and that's something we probably have to do more often.
Woods: And that's because our industry has gone through an incredible amount of change over the last year. But when it comes to setting strategy, I do have to believe that there are some areas of focus that remain unchanged from pre-pandemic times. Do you agree?
Willis: I do. The other person who would agree with that is our colleague, Ben Umansky, whom I know you've had on Radio Advisory a couple of times. He points out that, if we were having this conversation last January, everything we would've said you need to pay attention to still requires your attention—it may be the background, of course, but it's still there.
A couple of examples: the rise of the activated consumer, the adolescence of digital health, the courting of physicians by non-traditional partners, the continued shift of care away from costly inpatient settings. And maybe most important—the razor thin margins that most providers have to deal with. All of those things remain really important.
Woods: That's a lot, and it probably offers a little comfort to leaders facing all of this change, to say there are still all of these evergreen challenges that you can't neglect. Is there anything that might fit into this evergreen category that you might suggest leaders prioritize more now in this peri-Covid world than maybe they would have 10 months ago?
Willis: There were so many things that you still have to pay attention to. Everything to do with your costs of care, everything to do with being the most accessible health care system so you can compete for patients. But one thing I'd say is evergreen, but needs to be greener than it ever has been, is supply chain optimization.
Get your supply chain team out of the basement, whether they're there physically or metaphorically, and recognize that a strong supply chain can not only be a significant competitive advantage when it comes to costs. It might be the most important thing you have to do when it comes to ensuring the safety and reliability of your people.
Woods: And that's a really good example of something that I think probably would have been on the to-do list a year ago, but not at the top. Whereas now we might say this needs to be perhaps in the top three of the things that you're focusing on in the new year.
Willis: I guarantee you every clinical person at your organization now knows the name of somebody in your supply chain organization as a result of what they've had to go through this year.
Woods: Are there any others that you might put in this "greener than before" category?
Willis: The one that I don't think enough people are thinking about or talking about, but it's related to this, is safety. Most years we take for granted that everybody's doing that. Ever since the first Institute of Medicine (IOM) report came out, "To Err Is Human," we've been focused on preventable errors, adverse events. But nobody's really talking about that this year.
So we have to make sure we're not letting the urgency of Covid take the spotlight off of all of the adverse events that still happen, that are still preventable. Let's not wait for the next IOM report before we shine a spotlight on that.
Woods: That's right. I think the one thing I might add to the list here is probably the value proposition that every single health system has with their physicians and with the physicians who aren't necessarily in a W-2 relationship with that organization. Is that something you're tracking as well?
Willis: Yeah, that's such a good point, Rae.
I think what people are finally realizing is that we're not headed for a world where there's this bifurcation between the completely independent physician group and the fully employed medical group. That there's a lot of gray areas in between there and a lot of entities that are trying to play in that area. Whether it's private equity, whether it's nontraditional employers, like health plans. Whether it's these national players like ChenMed or Aledade that are stepping up and saying, "There's a really compelling value proposition here to keep you from being employed by the health system."
Woods: And since you teed me up, I'll go ahead and take this moment that it's just important to remember that loyalty among your physicians is not guaranteed. Especially right now when we're seeing so many clinicians leave the workforce, because they're going through something that none of us can possibly understand. They're going through trauma in this fight against Covid-19. And some of them are switching to an organization that perhaps did better, or has the perception of doing better, or they're leaving. Physician loyalty is absolutely not guaranteed right now.
Now, although it's pretty comforting to think about those moments of consistency from years past, we are living through probably one of the most disruptive moments in our industry and perhaps in the world. What new and different things do you want to make sure our listeners are placing their bets on next year?
Willis: I have three things in mind, and I think each one presents an opportunity in two senses. One, there are places where you might recognize that your old assumptions no longer hold. But they also might be a place where this is a moment of time for you to get a leg up on your competitor; if your competitor has taken their eye off the ball, these are areas where you might be able to leapfrog them.
Woods: What's the first thing?
Willis: So the first is a direct-to-employer models, such as centers of excellence or ultra-narrow network ACOs. And I want to put this back on people's radar screens because there's a lot of interesting data coming out this year about how employers are likely to behave, and it suggests that employers are going to approach what's happened this year differently than they did the global financial crisis of 2008. Specifically, they're almost certainly not going to be as aggressive about pushing cost onto their employees, but they are going to consider being more aggressive about things like steerage and reference pricing.
So if I'm a health system, even if I had this conversation with an employer five years ago and found they weren't interested, it's a good year to go back and take another bite of the apple.
Woods: What else is in your top three?
Willis: The second one is telehealth. This is a moment to realize we have to stop waiting for reimbursement policy and realize that if we don't provide this service, somebody else is going to. That's one assumption. And the other assumption that you need to tackle here is really stop assuming that this is only for the under-30 crowd.
I am 51. And when I'm choosing a provider, one of the first things I look for is the willingness and ability to engage with me virtually. If I can't do a video visit with you or send a secure instant message to my physician, that's two strikes against you right off the bat.
Woods: And clearly a good example of an area where institutions can get out ahead of their competitors, because there are such strong consumer expectations. You said there were three. We've talked about direct-to-employer and telehealth. What's the last one?
Willis: The third one—and it's another very personal issue, because of some things I went through with my parents this year—is behavioral health. And again, I think the key lesson from the age of Covid is waiting for the economics to catch up is a losing strategy here.
When you think about the impact of social isolation, depression, loneliness, dementia, and even substance abuse, those are going to show up as comorbidities with a much greater percentage of your patients than they ever have before. You have to be prepared to provide behavioral health care to your patients.
Woods: I am also pretty bullish on this one. We covered behavioral health in a very, very early episode of Radio Advisory. And if I am remembering correctly, the stat we referenced was that an estimated 80% of Americans would have a behavioral health need. And I honestly think that is dramatically low given everything that we've gone through, the effects of social isolation, you mentioned substance abuse, deaths of despair, et cetera. I think 80% is low.
I think this is going to be 100% of Americans, certainly in the health care workforce, are going to have a behavioral health need. And we are not even close to having the capacity to managing that.
Willis: I'm so glad you mentioned that, Rae. If you want the first test case, the first place to pressure test your assumptions, I would look at your own clinical workforce right now and see what they are presenting with.
Woods: These are all examples of areas where we really want to push our listeners' thinking. As someone who's having conversations with chief strategy officers, I'm curious if you have any examples of organizations who maybe are already proving that they're not slowing down in the face of unprecedented uncertainty and they're using this moment to really get ahead of their competitors.
Willis: Yeah. I've got a couple there. And one of them, frankly, is courtesy of you and the podcast. So just a couple of weeks ago, you had Mark Harrison from Intermountain Healthcare on, and he spoke about the role of telehealth and virtual care in meeting their mission, in meeting their margin targets, and as part of their longer-term strategy for building out access. So certainly, it's an organization that is taking the telehealth challenge to heart.
And just in the past two weeks, I've had conversations with health system chief strategy officers who are clearly revisiting their direct-to-employer opportunities in recognition of some of the forces that we just talked about. I think we will see some interesting moves in that direction.
Woods: This reminds me of something that I've said before on the podcast. I've referenced that in my most optimistic moments, I'm really proud of the agility and innovation our listeners have demonstrated. You referenced some of those conversations just now.
In my darker moments, I think about that level of innovation just fizzling out. And that's a real concern to the leaders who are pushing the pace of change. They're making big bets right now. Do you have any advice?
Willis: It's probably stating the obvious on this one, but the big thing that I worry about here is fatigue. People in health care are tired. Your clinical staff have never been stressed or stretched as much as they have been this year. Your administrative staff have had to come up with new processes and revamp everything to try to meet the needs of the pandemic. People are really tired.
And I know it's very easy for me to be talking on a podcast about all the different things we need to do. If I were a leader right now, before I push go on any of those things, I would be stepping back and saying, "How are my people doing? How are we showing up for our workforce right now?"
Woods: Especially in a moment where the workforce is really not going to get a break. If you think about the fact that this time of year is always extra stressful for the clinical workforce. We see lots of rushing to get procedures done and appointments done before the end of the plan year. It's flu season. And of course, Covid is raging across the United States.
Willis: The way that I think about this one—every health system's website that you go to, there will be a mission, vision, and set of values. And two things you can always predict will be in there. They want to deliver high quality care, and people are their most important asset.
And it's that second one that I'm suggesting now is the time to prove it. If you can't demonstrate this year, what that means in a very tangible sense, I don't bet on your ability to be successful at any of the other things that we've talked about today.
Woods: I think that is exactly right. My other concern is that even some of the elements we talked about that are at the top of the to-do list, they're not necessarily ones that leaders haven't attempted before. Do you have a message for who are maybe coming at, let's say, direct-to-employer for the second time and an effort to push them to continue forward and keep doing better?
Willis: It all goes back to something I said at the very beginning: I don't know that we have to do the strategy plan more frequently, but I think we have to pressure test our assumptions more frequently.
And this is one where the assumptions that you make or that you made five years ago may not hold. The economy is humming on all cylinders and employers are going to say, "Yep, I get that you are great value, quality for the dollar, but I'm not willing right now in a tight labor market to go in front of my employees and say, I'm going to reduce their choices." Different world in 2021.
And employers are going to face some really tough decisions, and employees are going to be in a different place than they were before. This is a time where their appetite for making these more dramatic changes to benefits design is going to look different than it did five years ago.
Woods: I have to say, I agree with everything we've been talking about thus far, but I have this little voice in the back of my head that's saying, "Gosh, it's got to be so hard to prioritize efforts in this moment."
I never want our listeners to hear this conversation and think, man, Rae and Dave are telling me I have to do everything that I was focused on in 2019 and 2020, and add new things to the list. How can we help our listeners actually prioritize where to start?
Willis: Let's go back to Maslow's hierarchy. I think that's the right framework to use here.
Number one, take care of the safety and security of your people. If you can't do that, if you haven't done that, don't even bother with the other things. You're just not going to get it done.
Second, get your own house in order. That's the no-regret stuff we were talking about at the very beginning, Rae. Focusing on those things that are core to margin performance, keeping the doors open, being accessible to consumers and to patients. You got those first two things down.
This is where I take you back to there are opportunities. Pick one of those things that we discussed earlier, direct-to-employer, telehealth, behavioral health. Is there one where you're excited about the opportunity to bring something new to your market? Don't feel like you have to do everything, but I would tackle them probably in that order of priority.
Woods: And to your point, there's actually still a lot of running room when it comes to those more traditional strategic priorities. There's a lot that can still be done there.
Willis: No question. No offense to the revenue cycle employees out there, who are doing incredible work, but that's not the topic that gets me out of bed excited every day. But every single time our colleagues in revenue cycle research do their analysis, health systems are leaving tens of millions of dollars on the table because they still haven't optimized their revenue cycle. So that no-regrets stuff is where you're going to find the running room, find the financial cushion to do some of the other things that we talked about.
Woods: Yes, absolutely. I'm a little bit surprised that you haven't brought up something else. Something that's maybe top of mind for folks right now. Covid-19 has certainly not been kind to health care finances. And that is one of many reasons why some are predicting greater levels of M&A in the coming years. Is that something that should be on the priority list?
Willis: Well, I think it's going to happen. The question is, to what end? I'm not talking here about what I would call very strategic M&A. I'm talking about horizontal consolidation that is born out of financial desperation on the part of one or more of the health systems.
And my question for everybody who's thinking about going down that path is, where's the evidence that that actually works? Multiple studies in the past four years have looked at this from a variety of angles. And the next study that shows that horizontal integration actually creates financial value will be the first one to do so.
Woods: Since you are a listener of Radio Advisory, you probably know what's coming. It's the question I ask every single one of my guests at the end of our episodes. What is the one thing you want health care leaders listening to this podcast to focus on right now?
Willis: Well, I'm going to cheat, Rae, and I'm going to give you two. Because I already had my plea to step back and make sure that you're doing everything that you can to listen to and take care of your people. Basic Maslow's hierarchy is the most important.
But if you've done that, it's really time to go back to your most recent strategic plan. And you started with a set of assumptions. Whether it was a SWAT analysis, a set of expectations about consumer behavior, what have you. This is a good time to look at those in detail and ask yourself, how confident are we that this still represents our reality?