Thoughts from Ken Kaufman

Comments on Current Management Issues in the Healthcare C-Suite: Hospital Strategy and Planning in Times of Financial Challenge

3 minute
Calculator and stethoscope

I think it is the general rule of thumb that during times of financial downturns hospitals tend to aggressively cut back on both planning and the execution of overall strategy. This approach seems to make governance and management sense: why would your organization spend future dollars when present dollars and current profitability are dramatically challenged?

Circumstances in the post-Covid era appear to be no different. How do we know? In the first half of calendar year 2019 total hospital debt issuance was $12 billion. In the first half of calendar year 2022 total hospital debt issued was $19.3 billion. Financial performance across the hospital board in 2022 was “awful” and by the second half of calendar 2022, total hospital debt issued was only $9.6 billion and the amount of debt issued in the first half of calendar 2023 fell further to $8.7 billion.

If you believe, as I do, that the absolute amount of hospital planning and strategy execution is highly correlated to total hospital debt issued, then we can conclude that hospitals post-Covid have significantly de-emphasized planning and strategy. As noted, this approach would certainly be expected based upon previous historical experience but is it the right road for hospitals to take at this time?

In fact, I do want to suggest in this blog post that the relationship between the Covid-induced financial downturn and the total attention to current hospital planning and strategy is different in substance now and should be approached differently by both the C-suite and by Boards. A few observations follow to encourage the discussion:

  1. The Covid Destruction of Strategic Relevance. One prominent CEO in the Southeast told me that post-Covid there was nothing relevant left from his 2019 strategic plan. This is an important point. In past financial turndowns hospitals could afford to ride out the immediate future with a “less than adequate” strategic plan. But my guess is that, like my friend in the Southeast, many hospitals now find their strategic plans are no longer “very strategic” and hardly “plans” at all.
  2. The Vision Question. I would maintain that successfully navigating out from under the Covid downturn will require individual organizations to make a long series of financial, strategic, and clinical decisions. Another of my CEO friends suggests that managing through such financially distressed complexity first requires a corporate vision and, in fact, currently calls into question how many hospital organizations have emerged from Covid with an intact vision that is still understood by employees, managers, clinicians, and Board members alike?
  3. Strategic Investment. Many hospital organizations lost significant competitive ground during the pandemic. Failure to invest right now, failure to plan right now, all accompanied by a reluctance to issue additional debt poses the imminent risk of losing further ground in a healthcare marketplace that seems more random and disorganized every day.
  4. Counterintuitive Strategic Aggressiveness. Is it possible that maintaining usual levels of investment during this post-Covid period in both planning and strategic execution is the best way forward? Can aggressiveness lead to competitive advantage and set the stage for a future increase in market share? Maybe those questions don’t have actionable answers in the immediate moment, but it is, I think, important not to take such strategic aggressiveness off the management agenda prematurely.

Making hard decisions under uncertainty is the management dynamic of the moment in American healthcare. Unexpectedly, I found this very point illuminated by the poet James McMichael by way of the poet Robert Hass in his collection of essays, Twentieth Century Pleasures: Prose on Poetry.

“Volition is, of course, what is wanted if one is going to combat uncertainties….And planning, McMichael reminds us, is the main human embodiment of will. Its purpose is to allay anxiety by showing us how we are going to get there. In fact…planning and anxiety are almost Siamese twins. It is when we are anxious that we start to plan.”

There is little doubt that anxiety is the emotion of the moment in hospital conference rooms and Board rooms. And as McMichael and Hass sagely note, only ongoing and intelligent and determined planning can bring that anxiety under organizational control.

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