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The Keckley Report

The Three Blind Spots in Hospital Strategic Plans

By October 31, 2022March 1st, 2023No Comments

There are 6093 hospitals in the US: most (84%) are community hospitals accounting for 31% of total health spending ($1.27 trillion which does not include the medical practices and insurance plans they own).

Per the American Hospital Association, 2960 (58%) of community hospitals are non-government, not for profit, 1228 (24%) are investor-owned, for profit and 951 (19%) are state/locally owned; 65% are urban, 68% are affiliated with a multi-hospital operator and the majority (53%) are currently operating at a loss.

In the early stage of the pandemic, hospitals garnered widespread public support for their Covid care heroics. That’s changed: today, hospitals face unprecedented pressure to be more transparent about their prices and business practices, more affordable to employers and consumers, more accessible to diverse and underserved populations, more competitive against emergent disruptors with deep pockets and more responsive to media scrutiny. Almost weekly, a national news outlet takes aim at a hospital and social media are ripe with war stories.

It falls on the hospital’s Board to approve strategies to address these challenges. Per the AHA’s Center for Healthcare Governance, strategic planning is one of the Board’s five major responsibilities:

“The board ultimately approves the hospital’s strategic plan and oversees implementation of the plan.” (p.35) …Strategic planning is a disciplined process to define the purpose and direction of an organization, recognizing the current and future state of the external and internal environment within which it operates. (p.51).” Guide to Good Governance for Hospital Boards | AHA Trustee Services

For most hospitals, the process of planning falls on the CEO and Chief Strategy Officer. System affiliated hospitals get assistance from “corporate” staff that provide input in data gathering and some (not-for-profit and investor-owned systems) facilitate the process. But studies show the active engagement of hospital boards in strategic planning is lacking. Though the Board has fiduciary accountability for the hospital’s plan, it usually consents to the management team’s recommendations with minimal questioning.

For 40 years, I have facilitated Board Retreats for hospitals, health systems, insurance plans and medical groups. At no time has the level of uncertainty about the future for hospitals been as intense nor the importance of a forward-looking strategic vision and planning been as necessary as now. The issues are complicated: lag indicators about demand, clinical innovations, reimbursement, costs et al are a foreboding backdrop for these discussions. And three issues have surfaced as blind spots in the environmental assessments and deliberations preceding the plan:

INADEQUATE ATTENTION TO CORPORATE CULTURE: Per CultureX analysis, of 128 topics that employees discuss in Glassdoor reviews, five attributes of culture — disrespectful, noninclusive, unethical, cutthroat, and abusive —render a culture toxic in the eyes of employees. Workers who experience a toxic culture are more likely to suffer from greater stress, anxiety, depression, and burnout which is rampant in the hospital workforce.

The hospital’s culture is a critical determinant in implementing its strategic plan. But most Boards spend little time validating management’s representation about the culture of the hospital and even less time in independent study about the topic. It’s a blind spot. It is manifest in cutting corners on safety and quality, neglecting bullying, credentialling of clinicians with suspect backgrounds and others. Employee surveys alone do not tell the story. It’s a blind spot

INADEQUATE UNDERSTANDING, MONITORING OF COMPETITION: Hospital boards are routinely provided data from management about competing hospitals, physician organizations and ancillary providers. They’re alerted to changes in the health insurer and prescription drug markets—often in the context of blame for healthcare’s cost and affordability issues.  Less frequently and with less data, hospital boards are alerted to the actions and plans of disruptors like CVS, Walmart, Optum, Walgreens and Amazon and discussions about private equity-funded activity is usually characterized as “barbarians at the gate”.

Hospital care is a competitive market: the scale of scope of services necessary to a hospital’s future is dramatically different than the past. And tomorrow’s hospital competitors are better funded and better positioned than incumbents. It’s a blind spot for hospital boards.

INCOMPLETE UNDERSTANDING OF THE PURCHASER ENVIRONMENT: Most hospital boards assume Medicare and Medicaid reimbursement are the hospital’s most important purchasers. Employers and consumers come after. Most consider employers a necessary customer to sustain the hospital’s operating margin but little more. And most consider consumers passive dependents on physician recommendations and insurance directives.

The purchaser market—employers, consumers, insurers et al—has lost patience with hospitals. Mitigating purchaser disaffection and optimizing a hospital’s value proposition to purchasers is an imperative. It’s a blind spot for hospital Boards. 

Last weekend, I hosted the Chief Strategy Officer Roundtable in Asheville. The tone was upbeat though uncertainty about the market is recognized. These folks are understandably concerned that their Boards be more attentive to their strategic plans. They’re right. And these blind spots deserve their attention.


PS: Wednesday, join Evidence Care CEO Bo Bartholomew and me at 10 CDT for a discussion about market forces changing the standards of care upon which hospitals, medical groups and insurers depend for payment and outcomes. Registration link: 



The Guide to Good Governance for Hospital Boards | Center for Healthcare Governance

Balancing hospital governance: A systematic review of 15 years of empirical research Soc Sci Med October 26, 2022 DOI: 10.1016/j.socscimed.2020.113252

A look at ‘governance effectiveness’ in hospitals and health systems today Advisory Board June 19, 2019

Fast Facts on U.S. Hospitals, 2022 American Hospital Association

National Health Expenditure Data CMS /

Hospital governance and the quality of care Health Affairs January-February 2009 doi: 10.1377/hlthaff.2009.0297. Epub 2009 Nov 6.

Hospital Board of Directors: Overview, Roles, and Responsibilities On Board August 16, 2022

Trustee Insights Archive Editions | AHA Trustee Services

Donald Sull, Charles Sull How to Fix a Toxic Culture MIT Sloan Management Review September 28, 2022

The ridiculous rise of the chief purpose officer — corporate America’s half-baked attempt to fix the employee burnout crisis Insider October 25, 2022


Study: Hospital price variation for head and neck surgery significant: Researchers analyzed the association between hospital price markup, market concentration, and for-profit status for head and neck cancer surgery. Finding:

In this cross-sectional study of 150 275 patients, there was wide variation in hospital markup for head and neck cancer surgery, with a 4-fold increase in charges relative to costs in 25% of hospitals. The highest markups were found in for-profit hospitals in moderately concentrated and concentrated markets.

Miller et al Hospital Markup in Head and Neck Cancer Surgery in the US JAMA Otolaryngol Head Neck Surg. October 27, 2022. doi:10.1001/jamaoto.2022.3340

KHN: North Carolina hospital consolidation: “A state treasurer’s report found that seven large hospital systems in North Carolina received $1.5 billion in covid relief money while collectively seeing their cash and investments grow by $7.1 billion from 2019 to 2021.

Atrium Health, for example, received the most money in the state, with $589 million in covid relief aid and $438 million in a type of emergency Medicare payment that boosts hospitals’ cash flow by providing money upfront for future services. The report found Atrium posted $1.7 billion in net profit in 2021 after a merger with another hospital system.”

Hospitals Said They Lost Money on Medicare Patients. Some Made Millions, a State Report Finds.October 25, 2022

Blake Madden Retail Health Updates WorkWeek October 27, 2022

Axios: Hospital financial woes challenged: “Hospitals are pleading with Congress to postpone looming Medicare pay cuts, citing what they say has been an extraordinarily difficult year. But that unified message belies the fact that hospitals’ financial situations vary significantly, and experts say some facilities would be just fine without lawmakers’ help.”

Hospitals have experienced negative operating margins all year through August 2022, data from Syntellis and Kaufman Hall show. Experts note that operating margins are generally lower than total margins.

In Q3 earnings posted so far, most hospital companies are seeing higher revenues than they did in Q2.

Hospitals test the goodwill of Congress on Medicare cuts Axios

Highlights: Altarum Health Sector Economic Indicators brief:

·        National health spending in August 2022 grew by 4.9%, year over year accounting for 17.4% of GDP—down from 18.4% in December 2021 and the lowest share since June 2015.

·        Nominal GDP in August 2022 was 9.4% higher than in August 2021 as GDP growth continues to outpace health spending growth.

·        The Health Care Price Index (HCPI) increased by 2.8% year over year in September,–below the CPI-U measure of medical care inflation in September (6.0%).

·        Private prices for health services increased 3.5% year over year in September, while Medicaid prices increased by 3.9%, and Medicare prices dropped by 0.8%.

·        Economywide price growth slowed very slightly this month, as overall CPI inflation fell to 8.2%. Services CPI growth (excluding health care) increased 7.5% year over year, while commodities inflation fell to 9.6%.

·        Health care gained a robust 60,100 jobs in September 2022, with ambulatory settings gaining 28,100 jobs, hospitals gaining 27,500 jobs, and nursing and residential care gaining 4,500 jobs.

·        Jobs in ambulatory settings are 366,000 (4.6%) above the pre-pandemic level, while jobs in nursing and residential care are 346,000 (10.2%) below.

·        The economy added 263,000 jobs in September, showing some moderation from the average gain of 420,000 per month through the first three quarters of 2022. The unemployment rate fell to 3.5%.

·        In August 2022, average hourly earnings in health care grew 6.8% year over year, while earnings across all private sector jobs grew 5.2%. By setting of care, average earnings in residential care settings grew by 8.3%, compared to 7.9% in hospitals, and 5.5% in ambulatory care settings.

October 2022 Health Sector Economic Indicators Briefs Altarum October 21, 2022


Government reports: lag indicators point to near-term slump, perhaps recession:

·        Labor Department: Jobless claims increased slightly to 217,000 from 214,000 prior week. Claims near their prepandemic 2019 weekly average of 218,000. Job growth slowed in September, with employers adding 263,000 jobs, down from August’s increase of 315,000 and the monthly average gain of more than 400,000 during the first half of the year. The unemployment rate fell to 3.5% in September from 3.7% in August, matching a half-century low that was last reached in July, as the number of people in the labor force fell.

·        Freddie Mac: The 30-year mortgage rate hit 7.08% this week vs.3% a year ago per mortgage lender Freddie Mac.. A buyer who puts 20% down on a median-priced home would have a monthly payment of $2,300, according to listings website That is up by almost 80% from a year ago, when the monthly payment was $1,300. In September, existing-home sales fell 24% from a year earlier, and new-home sales were down 18%.

·        The Commerce Department:  Overall spending increased 0.6% in September over August as measured by the Personal Consumption Expenditures index (PCE)–slightly lower than the 5.1% pace in the second quarter. The overall PCE level rose a very high 6.2% in September from the same time last year, exactly the same as August. This means the Fed’s 3% rate hikes this year have not done much yet. Wage gains were offset by higher prices in September, a decline from August when “real” wages (adjusted for inflation) rose by 0.2%. And the personal savings rate fell to 3.1% from 3.4% in August.

·        Federal Reserve:  remains on track for another three-quarter point hike at its meeting next week

Ben Eisen U.S. Mortgage Rates Top 7%, Highest in More Than 20 Years Wall Street Journal October 27, 2022 www.wsj com/articles/u-s-mortgage-rates-hit-7-08-highest-in-more-than-20-years

David Harrison U.S. Jobless Claims Rose Slightly Last Week WJJ Oct. 27, 2022

Stocks down overall but healthcare services slightly better: US stock markets are down in 2022 YTD: Dow -9.57%, S&P 500 -18.15%, NASDAQ -29.04%, Russell 2000 – 17.74%. By comparison, the Public Markets for Healthcare services has fared better overall, but other sectors are under-water in sync with Macro trends: Healthcare Industry -7.41%, Healthcare Services -14.70%, Digital Health -36.80%, HC Equipment -25.97%, Pharma -10.25%, Biotech -27.67%

Standard and Poor’s


Amazon Pharmacy links home delivery with Blues “Meds Your Way” in 8th Blue Cross plan: Florida, Alabama, Minnesota, Nebraska, North Carolina, New Jersey and Oregon,

Walmart Health plans to open 16 health centers across the Jacksonville, Orlando and Tampa areas by fall 2023, the company said Wednesday. The clinics will be located beside Walmart Supercenters and provide primary care, labs, X-rays, behavioral health, dental health and community health services seven days a week. In addition to its 32 in-person locations in Arkansas, Florida, Georgia, Illinois and Texas, Walmart Health is also offering virtual care through the telehealth provider MedMD that it acquired in 2021. In addition, Certain Walmart Health centers in Florida and Georgia will begin offering value-based care to Medicare Advantage patients in January 2023 as part of a collaboration between Walmart and UnitedHealth Group, the companies announced in September. Florida clinics will be the first among Walmart’s locations to implement the electronic health record Epic.

CVS A new day in retail pharmacy: Per CVS’ Morning Consult survey of 2000 U.S. adults in August, Retail pharmacies administered more than 266.5 million doses of COVID-19 vaccines through the Federal Retail Pharmacy Program as of September 2022. 74% of Americans believe pharmacists should provide certain health care services when primary care is unavailable and 63% believe pharmacists are honest and trustworthy—just behind physicians (67%) and nurses.

JPMorgan Chase is partnering with Vera Whole Health and Central Ohio Primary Care to create office-based clinics for its 20,000 Columbus OH employees in what could be a pilot for a broader effort.

Value-based Purchasing

Study: Bundled payment program fails to reduce Medicare spending: Researchers analyzed the association between hospital participation in Bundled Payments for Care Improvement Advanced (BPCI-A) in Model Years 1 (2018) and 2 (2019) and Medicare spending and hospital incentive payments. Findings:

“In this difference-in-differences study of 694 participating and 2852 nonparticipating hospitals between 2013 and 2019, BPCI-A was associated with a $279.2 million net increase in Medicare spending. Hospitals with a greater Disproportionate Share Hospital percentage and higher percentages of patients who were Medicaid recipients and from racial and ethnic minority groups received greater bonus payments.

Note: The annual adjustments used by CMS actuaries for calculations of bundled payment savings and bonus allocations are problematic. This analysis is suspect as a result. More analysis is needed.

Shashikumar et al Association of Hospital Participation in Bundled Payments for Care Improvement Advanced With Medicare Spending and Hospital Incentive Payments JAMA. 2022;328(16):1616-1623. doi:10.1001/jama.2022.18529

Nutrition, Food as Medicine

Study: Food supply chain conflicted by industry influence: In an analysis of documents obtained via a freedom of information request, researchers found key leadership for the Academy of Nutrition and Dietetics (AND) hold important positions in multinational food and agribusiness companies:

“The AND, AND Foundation (ANDF) and its key leaders have ongoing interactions with corporations. These include AND’s leaders holding key positions in multinational food, pharmaceutical or agribusiness corporations, and with accepting corporate financial contributions. We found AND has invested funds in corporations such as Nestlé, PepsiCo and pharmaceutical companies, has discussed internal policies to fit industry needs and has had public positions favoring corporations. The documents reveal a symbiotic relationship between the AND, its Foundation and corporations. Corporations assist the AND and ANDF with financial contributions. AND acts as a pro-industry voice in some policy venues, and with public positions that clash with AND’s mission to improve health globally.”

The corporate capture of the nutrition profession in the USA: the case of the Academy of Nutrition and Dietetics Public Health and Nutrition October 24, 2022

Advocacy, Lobbying

Open Secrets: Pharma’s lobbying expected to hit record high in 2022: In the first three quarters, pharma companies spent a total of $281 million on lobbying vs. 2021 total of $389 million, making pharma the biggest spender in the health sector. The health sector was the biggest industry spender last year, OpenSecrets reported, dishing out a combined $830 million on both federal and state levels. The pharma industry was the top spender in that category — and Auble expects that trend to continue this year.

Open Secrets


Britain’s new PM brings healthcare perspective: Britain’s Rishi Sunak is the third prime minister in two months and its 5th since Brexit (2016), the former chancellor of the exchequer and Goldman Sachs banker, a Stanford and Oxford grad and son of Indian immigrant parents—one a physician and the other a pharmacist. Inflation in the UK, now at 10.1%, is rapidly eroding real household income. Since 2018, the country’s households have had less spending power than those of France, Ireland, or Germany– a big change from 2007, when the UK scored higher than all of those countries.

Rishi Sunak is anointed Britain’s new prime minister The Economist Oct 24th 2022


KFF Employer Survey: Family health insurance premiums in 2022 unchanged from 2021: In 2022, annual premiums for an employer-provided family plan were $22,463—essentially unchanged from $22,221 last year per the annual employer survey by Kaiser Family Foundation conducted between February and July this year. Employees paid $6,106 (27.18%) of the ’22 total vs. $5,969 (26.86%) in 2021. Other highlights:

·        The average cost of an employer health plan for an individual for 2022 was $7,911, compared with $7,739 last year.

·        The average 2022 general deductible for individual-worker coverage was $1,562, compared with $1,434 last year, which wasn’t a statistically significant change.

·        14% of employers were very satisfied and 54% were satisfied with access to behavioral healthcare in their plans


Rock Health: Value based contracting expected to increase: “While only five of 54 CMMI value-based models demonstrated cost savings, other multispecialty groups like Heritage Medical Systems have demonstrated success with VBC. With continued market interest, innovative analytics, and strategic partnerships popping up, tech-enabled solutions are driving value-based contracting to a new maturity for managing payment models and delivering quality care. We expect adoption of VBC contracts to grow, especially given the latest CMS strategic plan. “

Swimming in the risk pool: A pocket guide to value-based care Rock Health October 24, 2022


KFF: Medicaid enrollment expected to decease but spending will increase: KFF surveyed state Medicaid officials in 49 states. Key findings:

·        The official end of the COVID-19 public health emergency (in March?) could result in state Medicaid outlays growing at a rate of 16.3% in fiscal 2023; per enrollee costs will increase 6.7% in 2022, and 6% in 2023.

·        Growth in Medicaid enrollment is expected to slow to 8.4% in FY 2022 and decline to 0.4 % in FY 2023.

·        More states reported expanding Medicaid benefits than reported cuts in fiscal year 2022 and 2023. 

·        In more than three-quarters of states that contract with managed care organizations to operate Medicaid programs, over 75 percent of their enrollees are in these contracts for fiscal year 2022 and 2023. 

State Medicaid Officials Anticipate the COVID-19 Public Health Emergency Will End During State FY 2023, Leading to Medicaid Enrollment Declines, Slower Total Medicaid Spending Growth and a Sharp Rise in States’ Share of Costs KFF October 25, 2022


Motion filed against ACA preventive coverage stipulation: Monday, a legal challenge to ACA’s preventive services coverage was filed: The plaintiffs in Braidwood v. Becerra filed a motion on Monday asking a US District Court judge in Texas to block enforcement of the ACA’s no-cost requirement for preventive care services. The plaintiffs seek to invalidate all parts of the ACA requiring preventive health services on the grounds that the Preventive Services Task Force was never appointed by Congress, and lacks the authority to say which services insurers must cover.

The Implications of the Most Recent Challenge to the ACA’s Preventive Care Requirement Could Affect Millions

Care Management, Telehealth
Study: telehealth increases utilization: A study led by researchers at UCLA compared follow-up care for 17,000 patients who’d visited the Emergency Department at the California health system between April of 2020 and September 2021, and found that patients using telehealth were more apt to seek in-person care and be rehospitalized than those who’d had in-person care.

16% of those who’d had in-person post-discharge follow-up visits returned to the ED and 4% were rehospitalized within 30 days, while 18% of those using telehealth for a follow-up visit returned to the ED and 5% were rehospitalized.

JAMA Health Forum. 2022;3(10):e223856. doi:10.1001/jamahealthforum.2022.3856

Uneven access to medical care: Researchers analyzed trends in racial and ethnic disparities in barriers to timely medical care among adults in the US changed from 1999 to 2018. Findings:

 This serial cross-sectional study including 590 603 adults in the US found that the prevalence of 5 barriers to timely medical care that are not directly related to cost of care increased across all race and ethnicity groups. By 2018, barrier prevalence was significantly higher among Black and Hispanic/Latino individuals who were more likely than White individuals to report experiencing long waiting times and lack of transportation.

Caraballo et al Trends in Racial and Ethnic Disparities in Barriers to Timely Medical Care Among Adults in the US, 1999 to 2018