GPHA Clouds

Business Risk

The cost of how you make choices

There are several definitions of business risk on the web. Some of the business risks that hospitals face today are unavoidable components of the healthcare business. These components include ever changing government rules and regulations, reimbursement realities, uncertain volumes, and market forces. Our work starts with the choices you make. We work hard to mitigate business risk when and wherever we can. We provide the best guidance we can and work to operate in a data driven environment, using experts both from our staff, partners and vendors. 

By the way the difference between a partner and a vendor is in the alignment of goals or targets. Some vendors and payers are heavily margin motivated. A really good partner is heavily mission motivated and in alignment with your own mission. It is important to understand the mission your partner or vendor has. This goes beyond what is on their website to that really drives the hearts and minds of the partner or vendor. Just a small mismatch in vector at the beginning of a long journey will cause a huge variation in the endpoint, so in the interest of lowering your business risk of winding up somewhere you don’t want to be, check to be sure your mission is aligned with your partners and then beware of the mission of the vendors in your midst. Marriages and true friendships are partnerships. In these relationships, people work together toward a common goal with different talents and capabilities, sharing a common trust in the partner’s motives.

When you shop at a large department store, the mission of the store may be to provide the best service, but the unspoken part goes like this, “We provide the best service so that we can maximize our profits.” To be sure, they will treat you nice and have a pretty environment, but when you run out of money, they are done with you. They won’t consistently put themselves at risk. They won’t tolerate much business risk to keep your business. “The customer is always right…” is really a policy which carries its own inherent business risk. Do you have a life partner, a business partner, or a vendor, and how do (or should) you treat them differently?

Hospital employees can behave as professionals (always partners). It is true that some will miss this mark, but remember that they are human and will make errors.  As a business we theoretically have control over our employees and can do what is necessary to make sure they behave as professionals (always partners). When we don’t exercise our responsibility to appropriately orient, train, correct, and reward employees, we fail to mitigate a portion of our business risk.

Business partners may get held to the question: “What have you done for me lately?”  Versus “Can I count on you to help me stay out of a mess or will you be there for me when I am in a mess and is this consistent with our history together?”  While a “customer is always right” in vendor speak, a partner might be more likely to say, “I know you would like to go in that direction, but there are dangers associated with that decision and I strongly recommend against it.”  Or, in the case of a leased hospital, “We won’t take you down that road because the risk is too great.” There is a fine line in the decision making and as humans, we are all fallible.  Still, a pilot in a jet is a partner with his passengers, there is a trust relationship. The pilot will keep us safe because he is in this with us. This goes way beyond finances and takes us to mission:  The pilot wants to go home when the flight is over and so do we, creating perfect alignment of mission.

This is where you treat vendors and partners differently.  It’s ok to buy from someone who says “the customer is always right” in a setting where your purchase doesn’t involve business risk. That vendor who saves you hundreds of dollars on a printer may do so not understanding the parameters as a partner would, putting you at risk of buying the wrong solution and costing you more in the long haul (business risk again).  A “vendor” who is willing to point out when the customer is not right is really behaving more like a partner, willing to take a business risk (maybe risking your business with them) in order to protect you from (or reduce) your business risk.

A big part of operating hospitals is knowing how much hospital to have. How much volume and what type of services are questions that balance against the cost to provide the services and the community’s willingness to support a service. Critical Access Hospitals – CAHs (access really is their middle name) – generally have reserve capacity because they are more hospital than the community can support with volume because (in a nutshell) you can’t hire half a nurse to work full time and still cover the schedule. CAHs get cost based (not cost plus) reimbursement that helps them provide access to an otherwise underserved area.  This is one angle behind the necessary provider designation that enables some CAHs to benefit from the program. Still the CAH serves the whole community and because Medicare does not carry the cost for the entire hospital, overall patient volume is still too low, so the CAH has some business risk. So CAHs would seemingly have to tolerate much lower risk than a hospital of the same size paid on the Prospective Payment System (a PPS hospital), but it is still a risk.  Often this risk is borne to a large extent by the local taxpayer.

We understand full well that there is a limit to what local taxpayers can or should be asked to support. While Community Health Needs Assessments and/or Community Focus Group meetings often help us gauge this, more often it is the local hospital board that provides the necessary information for these decisions. The role of every hospital board is leadership. Some boards have the responsibility for operations as well, but every board has a responsibility for leadership (please notice that I said that twice). Discussions the board has regarding the age old balance between mission and margin help define operating parameters that CEOs can use to align hospital operations with the board’s goals.  The local board is our link to the local community.

At GPHA we take our responsibility to help you mitigate business risk very seriously. While there are some who consider us vendors, we choose to act as a partner in the respect that we will tell you when we believe you are wrong and why. We will work to help you understand the risks in the environment and the risks that may arise as a result of choices you make. When necessary we will be forceful to keep patients, staff, communities, and hospitals safe. We try to behave as partners in the communities we serve.

Our MISSION is achieving excellence in rural health care management. Our VISION is to be recognized as a leader in rural health care management; through excellence in innovation, knowledge, and commitment to the communities we serve. Our CORE VALUES are fulfilling a rich tradition of Christian values, and exploring, encouraging and practicing faithful stewardship. Operating our facilities with integrity and respect. Valuing those we work with and honoring their dedication, commitment, and passion to serve others.

We hope these things make us a good partner to help you mitigate business risk as you work to serve patients in your community.

Les Lacy and Dave Dellasega

Les Lacy Dave Dellasega

 

 

 

 

Les Lacy is a Regional Vice President for Operations, and Dave Dellasega is the President & CEO.

Posted by Aaron Miller on December 30, 2015 in GPHA Hospitals, Healthcare Improvement.

 

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