Today in health, it why some health systems do better than others. My name is Phil Russell. I'm a former CIO for a 16 hospital system. And creator of this week health, a set of channels, dedicated to keeping health it staff current and engaged. We want to thank our show sponsors who are investing in developing the next generation of health leaders, accordion dynamics, Quill health tau site nuance.
Canon medical and current health. Check them out at this week. health.com/today.
All right. I'm starting to see the drum beat and the drum beat is when you have a steady stream of posts, comments, stories. About how healthcare is declining and, , in variably it's more of a political conversation than anything but that, , somebody needs to step in and fix the mess. If you will.
And I thought it was interesting. So I commented on two posts that had that kind of, that kind of ring to it. And to be honest with you, I'm not a huge fan of people who posts. Not of people, but of comments. That, , present a problem, but no solution or no. Did they don't really start a good dialogue around it. It's just sort of like, look how broken this is. And so your only response is yes, it's broken. I agree. It's broken.
And I prefer to have more constructive conversation in that, right. Wrong or indifferent in terms of people's responses. I like to get the conversation started. All right. So I'm going to do that today. Get the conversation started. And I'm going to start with Becker's Becker says 10 health systems with strong finances.
I don't read a story like this much, and this was just posted five hours ago. Here we go. 10 health systems, spanner health, AA rating, and stable outlook. With Fitch, the Phoenix base. Health system, Phoenix Bates, health systems, core hospital delivery system, and growth of its insurance division combined to make it a successfully, highly integrated delivery system insurance.
, interesting. , Brian health AA rating, stable outlook with Fitch. The health system has a leading and growing market position. Very strong cashflow and a strong financial position. , I think you're going to find two things in all of this list. One is they either have a very strong market position in the markets that they serve. They're in their essential.
They're a third of the market or more in those They, , they have consolidated their service lines, , in a certain geography to make sure that they're streamlined from a cost perspective. And in some cases, what you're going to see better health Intermountain. , some others in here, sharp healthcare. You're going to see that they have diversified their business. They've gone into the payer models. They are payer providers, the payer providers.
Are doing just fine. Thank you very much. Those who have stayed away from it for whatever reason, or have done it and failed, , are generally struggling right now. So you have Deaconess health system in Evansville, Indiana. You have a Nova health system in falls, church, Virginia inner mountain salt lake city.
Nebraska medicine in Omaha, New York Presbyterian. In New York, obviously Parkview health in Fort Wayne, Indiana sharp healthcare in San Diego and unity point health. , Des Moines, Iowa based health system has strong leverage metrics and cash position. The credit rating agency , I'm not saying that there aren't financial challenges in healthcare there absolutely are. So let me give you examples of two posts. Again, I don't have a problem with the people who were posting them. I have a problem.
With how they position the conversation. And so that becomes the, , that becomes the challenge is, is what is the conversation? And does it move the conversation forward at all? So LinkedIn is the location. That I'm going to, and the first one is from, , Doug. Hetherington who, I don't know. He's CEO of something.
, wake up America. Our healthcare system is not well. Health insurance companies have sucked prosperity. Out of the middle-class for decades. And now it's beginning to crush the actual healthcare system. Common spirit health is arguably the country's largest health system. With 142 hospitals and 150,000 employees and just posted a $1.3 billion operating loss.st. , in the first quarter of:
And the health systems has done nothing wrong. They've just been beaten up by the insurance carriers. To which I think about that for a little while. And I decided to respond. I don't usually wait into these cause I, you know, again, I, I, I don't know if this is just going to be a. A whole bunch of people coming in and, you know, essentially rallying around this one point or, or if they really want to discussions. So this is what I wrote. Interesting comparison.
United healthcare has close to 300 billion in revenue and common spirit has 33 billion in revenue. One is a national company. One is a regional company. One is made sound acquisitions, Optum change, healthcare, et cetera. While the other is acquired struggling entities like Chi. And when I say struggling, I mean really big struggling entities with lots of problems, disparate geographies, bad technology, implementation Chi.
I was a mess. And a common spirit came at swooped in. Picked them up and, you know, they, they move forward. But again, very struggling. Entity that they picked up any MNA activities is challenging, but when one or the other side is struggling, , either financially, operationally technology-wise.
It becomes even harder. , one of these companies. United healthcare has grown strategically while the other tried to scale operationally. That's common spirit. , I would think a more interesting comparison would be UPFC Kaiser Permanente, Intermountain sharp, and those that have diversified their businesses much the way United healthcare has because United health care is a pair, but they're also provider now under Optum, right? So they're doing, they're doing technology, they're doing consulting, they're doing a pair.
They're doing, , they're, they're providing, , The health care services. So they're doing the whole thing. They've diversified their business. , MBA 1 0 1 here. Diversified business doing well, non diversified business. Not doing , I, and I go on, I also wonder why the emphasis on commercial payers, when most health systems.
Lose money on Medicaid and Medicare and they make up a larger portion of the claims. Again, just wondering. And so I, , I wanted to get that out there and I wanted to get that into our conversation here. Because I think it's important as people start to roll out that drum beat that there are some high, and it's the reason I started with the successful health systems, because there are some health systems that are doing well and there's some that are struggling.
Right. It's not all health systems, which ones are doing well. Well, we get into that because David chow friend and somebody we've had on the show several times says a us healthcare. And actually he's just stating facts. Then this is all true. You as healthcare providers are seeing their revenues. Shrink as the pandemic takes its toll hospitals. And I would say happened well before the pandemic, but we'll we'll , we'll, we'll let that one lie.
Hospitals are struggling to keep up with high expenses as patient volume lags. , this has led rating agencies, Fitch to down roads downgrade its outlook for the sector from neutral to deteriorating, which is true. Healthcare CEOs are screaming to find ways to offset those losses. But it is also a difficult task. These are CEOs. I granted.
This is a scenario where an CEO's are looking at this, but these were non forward-looking CEOs. We have known this problem has existed for at least a decade. We needed to diversify. We needed to get that first dollar of healthcare. And, , those that are scrambling now and saying, oh, we've got to cut costs or whatever that they missed. The boat just absolutely missed the boat completely. Anyway.:
The critical question is what will healthcare organizations change and transform to be more efficient? And I thought I'd answered the question. I don't know. Call me radical. Call me crazy. I thought I'd actually answered the question. So here's what I had to say. Traditional health care really only makes money on three operating items, oncology surgical volume, primarily vascular heart related surgery.
And imaging. They also take in money from philanthropy and in a good economy, they make money from investments. Health systems have been covering operating losses with investments and government dollars for years. To answer your question, you optimize for those things that make you money, reduce the things that don't.
Or find a new profitable lines of business. Okay. Again, this is MBA one-on-one. This is not new stuff. Everybody knows this. You minimize the things that cost you money, you maximize the things that make you money and you find new ways to make money. Okay. , the things where health systems make money happen, low hanging fruit for entrepreneurs and private equity.
, imaging and surgery centers. With parking and a better patient experience is not hard to pull off. And many of them are. Plus they don't have millions tied up in EHR implementations. If you look at these private equity firms that are doing imaging. And surgery centers. They're not going epic. They're not going Cerner. They're not going big name EHR. They are implementing something themselves.
, and a CFO once referred to this to me as death by a thousand cuts. , and I can want, how systems should optimize these three, defend the business against new entrance. Optimize the remaining service lines across your geography. Sell real estate at its peak, as opposed to at its Shroff, which we have a tendency to do sell real estate only invest in technology that provides a real ROI in less than 18 months.
Innovating and optimizing the labor component of the business, which is healthcare's greatest costs. It makes perfect sense. Right? It's the greatest cost let's optimize around that. And then figure out how to get the first dollar of care insurance. They seem to be making money just saying. One of the things that concerns me is health systems that are going on. Let's call it low power mode and saying, Hey, we're going to ride this out.
And we're going to cut some costs, ride this out, and we're going to eventually. , you know, volumes are going to come back and payer mix is going to adjust and it's going to be better. That's not going to happen. I don't think that's ever going I don't think it's like, Hey, in three years, it's going to come back or five years, or, you know, the demographics are on our side and this aging population is going to have to come in.
I don't think it's coming Quite frankly. And that aging populations on Medicare anyway, where many of you don't make money. So it doesn't make sense to sit around and wait. I think fundamentally the business has to shift. And I think, you know, when you look at the business, what makes money, what doesn't make money.
, optimize around those things. If you can, politically, these, these things are hard to pull off. I'm not minimizing these things. They are very hard to pull off and to do do so effectively. , and you know, specifically around technology, you know, technology projects with 18 months. ROI. Let me ask you this. When's the last time you went back and measure the ROI on a project.
I, a lot of people like put an ROI together for getting funding for a project, but do we ever really go back and measure it and say, Hey, did we hit what we said? We were going to hit so important for transparency. Anyway. I, , throw the story out there and do this a little bit of rant. Just to say, it's not bad in every aspect of the industry. It's not bad for every house with some, those that have diversified those that have essential quality and markets. And by the way, just because they have essential reality of markets probably means they're making money on cost increases, which is not the best in
It would be better to diversify. Now is the business model of healthcare broken. Sure. Absolutely. It's broken. There's so many ways that it's broken. You can go back and listen to my conversation with, , Oh, my gosh. , anybody, I mean, but, , let's see. Mark Cuban was a good one. Bricker not Bricker.
Eric. Bricker's another one. In fact, if you don't subscribe to his daily, if you subscribe to You know, he just rails on the business model of healthcare and. What's wrong with it and why it's not working. So. , but hopefully I was constructive there. I mean, hopefully you can hear, there are ways for health systems to turn this around. There's ways for health systems to get on the right side of this equation.
But they have to move quickly and they have to move, , with, with haste because, , the model's not going to change. Money's going to keep going out. If you continue down the same path you're on. You have to optimize those service lines. Reduce the cost and you can optimize them across the geography. You have to reduce your costs in some way, shape or form.
The labor line is too great align on the P and L to not be optimized. And then quite frankly, you have to optimize your business. You have to optimize for revenue. Where it makes sense. And obviously you can't decrease quality at any turn, so you have to optimize for quality. You have to optimize. For return as well. And if you can't do both, if you can't do high quality and get a return, Then that's potentially a business line that needs to go away. Now I understand how challenging this is and how challenging these conversations are. And I have the utmost empathy for the executive teams that are having these conversations right now.
But, , but these are the conversations we need to have. That business model is changing. And we need to change with it. And get ready for what's next. All right. That's all for today. If you know someone that might benefit from our channel, please forward them a note. They can subscribe on our website this week, health.com or wherever you listen to podcasts, apple, Google, overcast,
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