Posted: 12 Nov. 2019 5 min. read

Could the CSO be the new MVP for hospitals and health systems?

By Steve Burrill, vice chairman, US Health Care Leader, Deloitte LLP

I live in Houston, but having grown up on the West Coast I’ve always been more of Dodgers guy. My kids, however, are rabid Astros fans and were thrilled to see their beloved team make it to the World Series last month…for the second time since 2017. Unfortunately, the Astros didn’t have the correct strategy to respond to the Washington Nationals’ aggressive hitting and onslaught of sliders, high fastballs, and change-ups.

Paul DePodesta represented a new type of chief strategy officer (CSO) for Major League Baseball teams. The book Moneyball, which was later turned into a movie, is based on the role he played in helping the struggling Oakland Athletics win the American League Pennant in 2002. By digging deep into baseball statistics and using sophisticated analytics to identify low-cost, high-value players, DePodesta and General Manager Billy Beane built a highly competitive team despite having one of the league’s lowest payrolls.

Strategy is becoming increasingly important for every business—whether professional sports teams or health systems. While the idea of a CSO is still a relatively new concept for hospitals and health systems, the position is becoming an important asset as the health care ecosystem contends with transformative technologies, increasing consumer demands, challenging financial positions, value-based payment models, and new competition.

CSOs can help build an offensive strategy

Hospitals and health systems have changed surprisingly little over the past several decades. In addition to new technologies and changing consumer demands, the sector is in the midst of a 180-degree turn away from the fee-for-service (FFS) payment model. The new value-based model, which focuses on the management of chronic diseases and keeping people out of the hospital, is both a departure from the FFS model and a new playbook.

In the past, hospital and health system CEOs often relied on their experience (and sometimes a gut feeling) when making strategic decisions. Many of them collaborated with their boards. But health system CEOs often recognize that they now need someone fully devoted to strategy—and are relying more heavily on their strategy leaders. Most hospital and health system CSOs work closely with the CEO to develop, communicate, and launch corporate initiatives. CSOs also keep a close eye on market and industry trends, competition, and regulations to understand the potential implications for their organizations.

Some members of the C-suite have authority over certain areas of the organization. The chief information officer, for example, might be responsible for technology purchases, while the chief medical officer and chief nursing officer oversee the clinical staff. The role of the CSO is more of an influencer to the CEO. In that role, the CSO can play a critical part in defining the organization’s direction. CSOs also are well positioned to help connect with other leaders to offer a fresh market perspective and to ensure that all initiatives align with the organization’s broader strategies.

The CSOs I’ve met tend to have an interesting combination of skill and backgrounds. Sometimes they move up the ranks of a health system, and other times they come from outside the sector and have deep experience in consulting or strategy. They also tend to have advanced degrees. I’ve also noticed that many strategy leaders are more focused on population health and broader organizational goals than on operational metrics like average length of stay or keeping beds full.

CSOs are preparing for a changing game

The Deloitte Center for Health Solutions recently surveyed more than 60 health care strategy leaders (CSOs and EVP/VPs of strategy and planning) from health systems and health plans—and conducted interviews with 10 more. Many of them said they are preparing for a multi-directional change, which is being driven by a wide range of stakeholders. Nearly 60 percent of survey respondents said competition from traditional and new entrants was a top concern, and 56 percent said evolving consumer demands were a growing issue.

Through our research, we defined several imperatives strategy leaders, CEOs, and the entire organization should consider as the future of health begins to play out. Here are three of them:

  1. Enlist the CSO to challenge the organizational status quo: Even just a couple of years ago, it was somewhat rare for me to see a CSO in a board meeting or to be involved in my discussions with a health system’s executive staff. But that has changed and CSOs are now regularly engaged in the conversation and appear to have more influence with the board and CEO than they have in the past.
  2. Own and incubate edge businesses: As the health ecosystem changes, hospitals and health systems should emphasize expected value over discounted cash flow. Along with understanding new payment models, strategy leaders should help the executive staff and board understand local demographics, population health, and the services their organization offers or could make available. As we get better at identifying illnesses early, or preventing them entirely, we should be able to treat more people in lower-acuity settings. Moreover, strategy leaders should understand what is most important to consumers as the industry transitions to value-based-payment models. This understanding could be the key to winning in the new health economy.
  3. Get into execution: Strategy leaders should be involved in implementing organizational and business-level strategies. One of my health system clients recently decided to expand operations into a rapidly growing part of the community. The CSO played a key role in encouraging the health system’s leadership to invest in a large outpatient facility and a small hospital, rather than the larger one that had been initially considered. It was the first time this health system executed a strategy in direct response to a payment model that will rely on more outpatient services and fewer in-patient beds. As CSOs gain greater influence, they are likely to move from offering direction and guidance to leading projects from start to finish. 

My house would have erupted if the Astros would have had the right strategy to win Game 7 and return the iconic Commissioner’s Trophy to Houston. But I’m happy for my friends and colleagues in Washington. They’ve had a long wait. The last time a D.C. team won the World Series, Teddy Roosevelt was in the White House. Maybe next year, the Astros—or better yet, the Dodgers—will be leading a hometown parade, high-fiving fans, and hoisting a shiny trophy above their heads.

 

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