Why AMCs must work in the “Now, Near and Far” for overall success

The role of academic medical centers (AMCs) in healthcare’s future was the focus of discussion among members of HFMA’s AMC CFO Council at their June 2019 meeting in Orlando, Fla., sponsored by Kaufman, Hall & Associates, LLC. The answer about an AMC’s role is far from certain, but the group’s consensus was summed up in the observation: “What got us here is not going to get us where we need to go.”

The discussion’s framework was Ford CEO Jim Hackett’s formulation of the “now, near and far.” This construct describes the need for organizations to work simultaneously in three time dimensions, remaining successful in the now, while placing bets on the future in the near and pivoting resources to support those bets in the far.

Structural issues

The typical AMC is a confederation of clinical departments. While these areas often work together, they also operate as semi-autonomous units, each headed by a chair who is responsible for recruiting and retaining talented department faculty and ensuring that the faculty’s research and teaching interests are adequately supported.

Looking forward, the challenge for AMC leaders will be to balance the vital role of department chairs with the need to streamline decision making and unite the organization around a system-based, strategic view. For AMC leadership, this will require focused efforts to educate both department chairs and board members about the imperative for change in the far, especially when the organization is currently secure in its performance in the now.

Council members identified several possibilities for striking this balance:

• Funds flow restructuring. Converting historical funds flow patterns into a model that is integrated with the organization’s strategic plan can align departmental activities with the enterprise’s overall success.
• Candidate selection. Required skills for department chairs and board members alike are changing. Business skills as well as academic talent are becoming progressively important for department chairs. Board members who can bring perspectives from outside of healthcare in areas such as consumer and retail strategy will be increasingly valuable as well.
• Transparent communications. Clear and timely communications regarding an organization’s overall strategic vision will set the tone for communications within the departments.

The right balance must be found to preserve the academic talent that is a basis for the AMC’s strength, while increasing the AMC’s agility to navigate the uncertainties of change in the near and far.

Competitive issues

The continued movement of services from inpatient to outpatient settings, combined with the emergence of new, well-capitalized competitors that operate on a national scale, threaten to erode the competitive positions of AMCs. Council members also are seeing growing price sensitivity among patients, as well as payer incentives to encourage consumers to use lower-cost care sites.

As one Council member noted, “AMCs don’t want to be the next CVS Health. Their goal should be to figure out where they add the most value to the healthcare system.” But Council members agreed that AMCs have not been very good at communicating the value of the care they provide.

That said, they do have some competitive advantages. Consumers tend to perceive AMCs as high-quality providers, and many enjoy a brand premium in their market. But consumers are not the only decision makers in the mix, and brand premium may not be enough to make up for higher prices. Primary care physicians and payers also play a significant role in choosing providers and care sites. AMCs must find the right blend of price, access and convenience to appeal across these constituencies.

Workforce issues

Predictive modeling and automation are being deployed at some AMCs to identify causes of staff turnover and reduce the labor resources needed to complete repetitive tasks.

Predictive modeling. Council members indicated that AMCs face a nursing shortage that is likely to intensify as Baby Boomers age and the demand for nursing services swells. Moreover, nursing turnover is a financial drag, with the average cost to replace a registered nurse due to turnover ranging up to almost $60,000. Identifying factors that contribute to turnover in the nursing staff is a first step in increasing retention rates.

Data analysis at one AMC identified several key factors associated with nursing staff turnover. The rate of unscheduled paid time off was the most significant predictor, as were the number of non-productive hours during a pay period, distance from work and tenure (with likelihood of departure increasing between two and 10 years of work).

On the other hand, the over-work rate — working more hours than planned during a pay period — was a significant predictor of likelihood to stay.

Direct intervention when indicators point to a high likelihood for turnover is a delicate task. But, insight into factors that drive this issue can help define positive measures, such as the ability to earn overtime pay, to mitigate the potential for costly turnover.

Automation. The virtues of automation — specifically robotic process automation (RPA) — were highlighted in a discussion of opportunities to reduce the labor resources dedicated to repetitive tasks, or to increase the scale of tasks completed without adding additional full-time employees (FTEs).

Tasks that have proved amenable to RPA include lease management, fixed asset accounting and recurring payments. The discussion identified several key factors that lead to successful automation:

• Identify processes that are both necessary and well-documented.
• Include a person familiar with the process on the automated solution development team.
• Focus on high-volume, highly repetitive processes.
• Determine whether there is a strong potential for FTE savings in excess of the costs to develop the automated solution.

Organizations should also think beyond RPA. Often, existing systems have functionalities that an organization has not fully exploited.

Committing to change

In the now, AMCs remain at the top of the U.S. healthcare system, but they are subject to the same forces that are disrupting the industry. These include downward pressure on rates, increasing competition for outpatient services and rising expenses for labor, pharmaceuticals and other supplies. To transition to the far, AMCs will need to be more agile in decision making, more competitive on price and convenience as well as leaner on costs to use the near to transition for long-term success.

About Kaufman Hall

Kaufman Hall is the performance solution company for organizations in dynamic, disrupted, and transforming industries. With a unique combination of software, consulting services, and data products, Kaufman Hall brings one, two, or all three to bear, driven by rigorous analytics, to help leadership achieve transformative outcomes, compete, and win. With particular expertise in healthcare, financial services, and higher education, Kaufman Hall hires the best of the best, to solve the toughest business problems on Earth.