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As Reimbursement Declines, What Leadership Qualities are Most Important?

August 23, 2018

During discussions about the Affordable Care Act over the past few years, we’ve assumed that hospitals, generally, have supported the landmark healthcare reform legislation. The expansion of insurance coverage to more people, reduces the amount of uncompensated care.

What many people have missed, however, is that the Affordable Care Act, and other regulatory and market changes have continued to decrease the actual reimbursement hospitals receive for the care they provide. From a recent summary of the situation in HealthcareDive:

  • Payments to hospitals will be reduced by $218.2 billion by 2028.

  • The cuts include $79.3 billion for Medicare Severity Diagnosis Related Groups (MS-DRG) documentation and coding, $73.1 billion for sequestration, and $25.9 billion for Medicaid Disproportionate Share Hospital (DSH) payments.

  • Medicare margins are hitting a 10-year low; and

  • Nearly one-third of hospitals have negative aggregate margins across all payer types. 

In addition, as we continue to move (albeit slowly) to value-based payment models, there will be inevitable growing pains. At the same time, commercial payers are ramping up pressure and moving as much care as possible to lower cost out-patient facilities.

Not surprisingly, hospital talent acquisition and talent management teams are seeing a shift in leader competency priorities. Trying to fulfill the organization’s mission and improving the quality of care and the patient experience, in the face of declining reimbursement, is a daunting task to say the least.

As more health systems take a more diligent and deliberate approach to leader selection and development, we are seeing a focus on a few key competencies.

  1. Adaptability and Innovation. Today, any hint that a leadership candidate isn’t adaptable is a serious red-flag. Being adaptable is one thing. This means someone can tolerate and navigate change. Innovation, on the other hand, means someone is capable of proposing, evaluating, and implementing new, creative solutions.

    Related: Three Reasons Hospitals Should be Using Executive Assessments
  2. Positive Impact. Everyone in the organization feels the pressure of heightened expectations and declining reimbursement. Today’s leader needs to project and engender confidence in the leadership team and in the organization. Positive impact is this ability to deliver positive messages, even in difficult times. It’s not as common as you might think, even in otherwise successful leaders.

    Related: How to Measure Communication Skills in the Hiring Process
  3. Collaboration and Empowerment – These challenges are too complex for any one individual. No CEO has expertise in all of the areas required to solve these problems. Senior leaders need to build a talented team and create a culture that values collaboration and empowers everyone, from leadership to front line staff, to find and propose solutions.

    Related: 3 Strategies for Building Better Senior Leadership Collaboration
  4. Results-Driven – This has been a major shift for healthcare. For decades the measures of hospital success were vague, at best. Not today. Like for-profit businesses, hospitals now have clear performance goals – both operational and financial. These goals need to drive everything we do. If done right, it means we strive toward better care while maximizing limited resources.

    Related: How to Use the 3 P's to Predict Manager and Leader Success

Certainly, there are others important competencies. We encourage our clients to understand their own unique challenges and build a leadership competency model that fits their needs. This should be the foundation of an efficient method of evaluating candidates, and for developing incumbents. To learn more:

healthcare leadership

Bryan Warren Bryan Warren was the former Director of Healthcare Solutions at PSI. He was responsible for developing and promoting tools and services designed specifically for the unique challenges faced by healthcare organizations.