As the Health Economy Transforms, Health Systems Turn to Their Strategy Leaders | Deloitte US Bookmark has been added
By Deloitte Center for Health Solutions, Deloitte Services LP
Eight questions for Providence St. Joseph Health’s chief strategy officer
In a rapidly changing health ecosystem, many hospitals and health systems are relying on strategy leaders to help navigate shrinking margins, aggressive competitors, value-based payment models, and increased consumer demands. The Deloitte Center for Health Solutions recently surveyed more than 60 health care strategy leaders (CSOs) from health systems and health plans—and conducted interviews with 10 more to learn more about this increasingly influential position.
One of our interviewees was Carladenise Edwards, Ph.D., executive vice president and chief strategy officer (CSO) at Providence St. Joseph Health (PSJH), a health system that operates 51 hospitals across seven states. Carladenise became PSJH’s vice president of population health in 2016 and was named CSO two years later. Prior to joining PSJH, Carladenise was the CSO at a California-based health system, ran her own consulting business, and served as a health policy advisor to governors in Florida and Georgia.
Josh Lee, Deloitte Consulting LLP, leads Deloitte’s Health Care Strategy practice and is a principal with Monitor Deloitte. He recently caught up with Carladenise to learn more about the role she plays at PSJH and to find out about some of the challenges that strategy leaders are working to overcome. Here’s an excerpt from that conversation:
Josh: The CSO is a relatively new position in business, but it’s even newer for hospitals and health systems where strategic decisions have historically been made by the CEO and the community’s hospital board. Why has that changed?
Carladenise: It is true that the strategy officer role has and continues to evolve. A hospital’s core advisory team traditionally included the CEO and chief of staff who was a clinician, the chief financial officer, and the chief operations officer. As health systems have grown and emerged through mergers and acquisitions, the need to think more broadly about the future of the hospital, the effective use of technology, financial sustainability, and revenue diversification has become an imperative. This changing environment created a need for a chief strategy officer, particularly in delivery systems led by CEOs who had traditionally been operationally or clinically focused.
Josh: Did the Affordable Care Act (ACA) and other regulations help accelerate the need for hospitals and health systems to have a strategy leader?
Carladenise: Absolutely. Following extensive input from health care stakeholders, including PSJH, the ACA created new regulations that began to transform the reimbursement structure in health care. Due to the rising cost of health care, the health care system—including providers, states, and the federal government—has been on a mission to adopt innovative solutions to help bend the cost curve. The CSO is often accountable for assisting with the development of strategies that focus on regulatory changes [e.g., the Medicare Access and CHIP Reauthorization Act (MACRA), the 340B Drug Pricing Program, and prospective payment systems], the adoption of new technologies, and the management of a complex payer environment. Health systems are working to transform their business models from fee-for-service payments to value-based payments and population health. In other words, moving from health care to health.
Josh: What factors are pushing hospitals and health systems to place a greater emphasis on strategy?
Carladenise: Forward-thinking CEOs came to realize that the dual reality of living in the present while planning for the future was more than a full-time job. A diverse leadership team that offered different experiences and perspectives was essential to guide the transformation. Health care is one of the only industries that is obligated to provide services in our communities regardless of an individual’s or family’s ability to pay. Typically, lower reimbursement rates from government payers, a dependence on highly skilled labor, and the growing number of uninsured and underinsured makes operating a medical practice, a hospital, or a clinic challenging. One of the major strategies among health systems has been growth or scaling up so the cost of operations and the acquisition of technology can go down. Other strategies include the use of predictive analytics to help manage the health of specific populations and moving high-cost services off the hospital campus to lower-cost ambulatory settings.
Josh: How does a background in consulting and policy come into play as a strategy leader?
Carladenise: The CSO helps facilitate forward thinking by garnering the best ideas from the team, which includes clinical and administrative staff and community and board members. The CSO then works with the CEO and other executives to devise a plan that aligns with the resources required to execute the strategy. My experience in consulting and public policy has helped me tremendously. Consultants and strategy leaders tend to share many of the same skill sets, such as building and managing relationships, developing strategic partnerships and new business ventures, and listening to community concerns while analyzing policy and the implications of economics, politics, and the environment on an organization’s growth and development. The role of the CSO is not necessarily the same in all organizations. We tend to fill in the gaps for the CEO or other leaders. With change happening so fast, system leaders often don’t have the time to study the implications that daily changes might have on the business.
Josh: Along with a deep background in policy and strategy, what else does a CSO need to succeed?
Carladenise: Most importantly, a successful CSO is an active listener, convener, and facilitator. We help the organization know which decisions need to be made, what the options are, and the risk or implications of a decision. An effective CSO also incubates new innovations and evaluates their effectiveness before passing them off to operations to scale. Planning and building for an unknown future is risky, so being comfortable with taking risk and failing fast is a must when creating or executing strategic plans.
Josh: What do you see as the most significant challenges that a strategy officer might face?
Carladenise: I prefer to answer the question of “what challenges do health systems face?” The CSO is focused on what is the in best interest of the communities they serve and the people who have dedicated their lives to providing that service. The industry’s biggest challenge right now is identifying and then adopting a financially sustainable business model for the delivery of care in a nation that does not have a sustainable solution for ensuring all Americans have access to high-quality, affordable care—regardless of their ability to pay for it. Major employers and innovative technology companies are causing disruption in health care and could force both greater consolidation and the closing of low-volume and under-resourced facilities. My prediction is that the current delivery system models will be replaced by data-driven and technology-enabled companies that are focused on one of two things: (1) managing the health and well-being of distinct populations and/or (2) supplying health care services for acute, chronic, and disabling conditions. Our challenge is deciding which business we want to be in, then creating the public policy and economic environment that will support our collective vision of a high-quality, accessible, and affordable health care system.
Josh: How do you help senior leadership, the board, and your caregivers buy into the idea that this environment is undergoing this transformation?
Carladenise: Most hospitals have gotten bigger and more sophisticated. Some have moved from providing specialty services to more general services while others have done the reverse. How they are financed and managed has not changed significantly since the implementation of the Medicare program decades ago. And changes hadn’t been needed until now. It is important that we help senior leaders, boards, and employees understand the new demands on health care that are driven by increased consumer demand, requirements for pricing transparency, and lower or non-existent reimbursement structures.
Josh: What do you think hospitals and health systems might look like 20 years from now?
Carladenise: In my humble opinion, if we get this right and the transformation occurs faster than I can imagine, in 20 years hospitals will be highly specialized facilities that provide services reflecting community needs and consumer demands. The purchasers (i.e. employers, insurance companies, or individuals) will shop for health services based on quality, price, and accessibility. Community hospitals will receive capitated payments from group purchasers. This will include payments from local, state, and the federal government for people who have public-sponsored coverage and supports. High-acuity and specialty hospitals will be able to demand premium payments from commercial purchasers based on their ability to compete on quality outcomes and accessibility.
Technology and innovative care delivery models will ensure hospital operations are efficient and that the total cost of care is as low as possible. Health systems will serve as intermediaries that are focused on population health management. They will use data and predictive analytics to help direct patients—on behalf of purchasers—to the care setting that best meets the patient’s needs. Twenty years from now, the desire for healthy populations will drive our business decisions and it will be in our interest as an industry to keep people in their best health as opposed to being primarily reactive and treating sickness.
Dr. Edwards’ participation in this article is solely for educational purposes based on her knowledge of the subject, and the views expressed by her are solely her own.