McKinsey recently gathered a group of healthcare leaders to discuss the outlook for the industry. The following is a summary of some of their remarks focused on their leadership lessons and the actions they are taking.
The importance of harnessing technology
“Technological change is one of three developments forcing structural change in healthcare. The others are changes in payment models, including value-based models, and the push for equity.” Bruce Broussard, president and chief executive officer of Humana, continued: “Technology is going to facilitate changes that give consumers more choices in channels.”
Tina Freese Decker, president and CEO of Corewell Health, agreed that there will be more focus on the use of technology, especially AI, that can provide care anywhere, especially where the patient wants it. “The question is where is AI going to go? There is so much potential, and we have to make sure that we use it smartly, securely, and safely. But I think we need to make sure it’s embedded into everything,” Decker said. “I do think we have to have the conversations about what we’re trying to accomplish and bring people along so that we actually build something that’s better.” For example, “Appointment scheduling is a challenge for all of us. We all have our own measures about how much online or self-service scheduling we are doing. We’re moving through the process, and it’s up to about 20 percent. It’s still slow, and we have to change that, because our consumers expect it to be much easier. I expect AI will help us with that.”
AI will be a game-changer in healthcare, the participants emphasized. David Holmberg, president and CEO of Highmark Health, recalled that, “For those of us who were in leadership positions for Y2K, there was a big spend running up to that. Then when the internet really took off, there was a big spend. I think what’s going to happen with AI will dwarf both of them. I think technology will absolutely make a dramatic difference. That’s why people are worried about scale—these investments are big. In our case, we’ve spent $1.5 billion building a technology platform, and we’re constantly changing it and evolving it.”
Some of the participants said they see AI as a way to save money and empower clinicians and administrative staff.
But Holmberg pointed out that the transition is not without risk and will need careful management. “The opportunity and the speed at which things are going to change, he said, “is going to be dramatic, and it’s going to be really important for all of us to have the right governance in place, because we do have to get it right. We are in the business that’s life and death, and there’s going to be risk to this.” But with AI, Holmberg said, “we’re going to have the opportunity to accelerate the elimination and automation of a whole bunch of stuff. And it’s going to be critical that organizations have the capability and the understanding of what to do with it.”
“Think of the power of generative AI to take out a bunch of manual work that we do on both the payer side and the provider side,” said Martha Wofford, president and chief executive officer of Blue Cross and Blue Shield of Rhode Island. “It feels like we are on the precipice of unlocking a ton of savings and value.”
AI is more about improving employee performance than rationalizing staff, said Sonny Goyal, senior vice president, diversified business group, and chief strategy officer, Blue Shield and Blue Cross of North Carolina. “We have to be really thoughtful about how we use AI—and how quickly we go at it, and how we prioritize where we test things. But I don’t think about AI as how many jobs I can cut. I actually think about AI as how I turn a person into a superhuman, how I put more data, more insights, at their fingertips, whether they’re in a call center, or anywhere in the organization, [to enable them] to be better informed and help our members in a better way. Obviously, there’s some things we have to be careful of, that we don’t put the wrong data in front of them, the wrong insights in front of them, that can drive a great experience into a bad one.”
The panelists also noted the opportunities afforded by the increased use of data and analytics in healthcare. “There’s so much opportunity for us to use data and analytics to better understand our members, to create very narrow, small segments, to deliver personalized care,” said Wofford. “We’re not there yet, but I do feel like in the last few months, with the breakthrough with ChatGPT, it’s so encouraging to think about what we can actually do with data and analytics. So I think that dream of actually delivering care that an individual values, and all the support and all of the help navigating to get to that care—which we don’t do a very good job of now—I feel like we’re really on the cusp.”
Go beyond pilots to scale
Obtaining scale in a new service line is key to value creation, the participants noted. Scale offers the ability to spread fixed costs and gain expertise and benefit from knowledge transfer with partners while providing new opportunities to develop and test technology, said Tom Jackiewicz, president of the University of Chicago Health System. As an example, Jackiewicz cited the benefits of knowledge exchange in his organization’s partnership with another healthcare system. “It’s been really helpful for us, because they run hospitals much more efficiently than we do. There are some infrastructure things that they’ve done that I have been very impressed with.”
The participants also discussed the importance of M&A in scaling. Corewell Health’s Freese Decker offered several suggestions for successful M&A: “Be really clear about what you want to accomplish. Just getting bigger isn’t a strategy. It needs to be that you’re doing it to get to affordability, or simplicity, or equity, or providing exceptional care.” She also stressed the importance of being willing to “over-communicate and over-listen, make decisions and move on, learn to be comfortable with tension, and move fast.”
M&A is not the only way to achieve scale, the speakers emphasized, noting that even the biggest players can’t do everything.
“I think partnerships come in all different forms,” said Bill Rutherford, chief financial officer and executive vice president of HCA Healthcare. “It doesn’t have to be purely just an equity partnership. But you’re seeking accelerated solutions. We’ve got clinical affiliations that are decades in the making. So I think it’s just important for an organization to be open for ways to achieve whatever strategic objective you have.”
“We are doubling down on our core business, but we’re expanding into other markets, including more outpatient, ambulatory surgery, and capturing commercial payer mix,” said Dr. Philip Ozuah, president and chief executive officer of Montefiore Einstein.
“But it’s also [about] partnering with others across the continuum of care. Having scale allows us to run experiments and to test out different models of care, different models of efficiency. Incrementalism is a failure. We have to be bold and go faster.”
Warner Thomas, president and chief executive officer of Sutter Health, concurred. “Scale allows you to improve upon capabilities, invest in them in a different way,” he said, “or maybe you join with another system that has those capabilities. So you get an alignment of capability, not just size. This idea of combining is not just around size, it’s around the capabilities that you bring to the table.”
But growth, whether through M&A or partnerships, must be approached carefully, the participants said. “We have three criteria when we think about whether to grow,” said Highmark’s Holmberg. “Is there a compelling reason to grow? Do we have the financial capability to grow? Do we have the guts to grow?”
“There are a lot of shiny objects,” said Brian Kane, president of Aetna. “There are a lot of things [that] come across your desk that seem really, really interesting and that you really want to fund. I think it goes back to what are the strategic objectives of your company. What are your real operational and strategic priorities, and [how can you make] sure the investments you fund are truly aligned with that? It’s constantly asking that question, ‘Why are we doing this’? We have alternative uses of capital—and frankly, it’s not just capital, it’s time. Management bandwidth is as important, or probably more important, frankly, than capital.”
Improve productivity to transform care
Improving productivity is top of mind for healthcare leaders, given labor shortages in the sector, inflation, and utilization increases post-COVID-19 pandemic. Participants offered their take on how to both improve productivity and the patient’s care experience. Some emphasized the role of clinicians in these efforts and the importance of gaining their trust.
For Chicago Health System’s Jackiewicz, the guiding principle of productivity improvement initiatives is how to make clinicians’ lives better. “One of the things I noticed right away is our clinicians feel overwhelmed with responsibilities. Whether it’s nurses, pharmacists, or our physicians, too much has been layered on their daily lives,” he said. “EMR [electronic medical records] was really a burden. They felt like every time there was any kind of need or new administrative detail, everybody said, ‘Work harder, work faster.’ When we tackled length of stay, we did it differently.
“I said, ‘I don’t want to ask the doctors for anything until we’re at the end of this process.’ I realized 80 percent of our work was hospital operational opportunities, while 20 percent was work with the faculty. We began by colocating patients. To deal with the pressures in the ED [emergency department], we were putting patients throughout the hospital. For hospital service and general medicine, colocation saved the [clinicians] an hour a day.
“Next, we added 40 percent more care coordinators. We revised their jobs and helped move patients through the system more efficiently. Weekend services were our next challenge. We weren’t doing echos, interventional radiology, and other testing on weekends, so we beefed up those services. After all that was done, then we went back and looked at consult time.
“The clinicians had observed how the hospital was invested in improving their lives, so they were much more open to working together on consult times. All of this work happened in relatively rapid succession. It’s amazing how quickly we’ve brought down length of stay.”
Sutter’s Thomas said he focused on simplification and length of stay: “We have to make our organizations easier to work in and to use. So we’ve looked at simplification. How do we take the amount of time that our physicians and nurses spend in the system and can we reduce that between 20 and 30 percent over the next 24 months?
“Sometimes length of stay is looked at as a money issue,” he said. “I look at it as a way to service more patients—because we turned down 10,000 transfers last year for patients we couldn’t take care of. I think people get more inspired by that and can rally around those types of things.”
Montefiore used a three-pronged approach to productivity improvement, said Dr. Ozuah. “First was, explain the why. Second, fix broken processes. And third, embrace technology.”
“We sat with the doctors and we looked at the wait times of patients trying to get in to see them. That doesn’t make any of the doctors happy, that there is a wait and there’s poor access. So that was the why.”
Then, he said, there was “the amount of time that’s spent on low-value tasks. So we took suggestions from the doctors and the clinicians and implemented and tackled those. Then finally, technology, moving as quickly as we could to automation and digitization. We’re not all there yet, but it’s a focus.”
The structural change ahead in the sector comprises who does the work and where does the work get done, said Humana’s Broussard. “The work will move more toward generalists, including nurses and certified nursing assistants. Care will move to more convenient settings, all the way to the home.”
Ben Breier, a partner and head of US private equity health and life at the private equity firm Partners Group, discussed the importance of efficiency. “We have to keep finding more efficient ways to be able to provide the kind of core services that our customers—healthcare patients—need, and we have to do it in a more cost effective way,” he said. “We’ve all been saying this for a long time, and there’s lots of innovation and strategies that are out there, whether it’s alternative sites, home, or telehealth, or the evolution of precision medicine. It certainly has a lot to do with data analytics: the deployment of technology into healthcare capabilities to do things at a lower cost. So we are looking across the healthcare spectrum to find ways in which we can deploy capital.”
Unlock silos through better integration
A big source of concern for the healthcare leaders was how to better integrate their organizations’ service lines for the benefit of their patients. No one claimed to have gotten it right yet. They also emphasized the value of partnerships to acquire additional capabilities.
“The key to success of a capital-light model is not just the ability to own an asset or to synthetically contract with one,” said Humana’s Broussard. The issue is “how do we integrate across business lines so that the customer isn’t the integrator; the system is the integrator.” He continued, “Integration is ultimately what a scalable organization should strive for in service to members and patients. Integration can lead to higher patient satisfaction, better outcomes, and ultimately higher profits.”
Change, said Highmark’s Holmberg, always presents opportunities. “An integrated system offers the chance to take advantage of those opportunities. Finding like-minded partners, who have the same values, who believe in what you believe in, and are willing to share the success and the risk, will be critical for all of us. But it’s going to take a public-private partnership to solve the big issues.”
“What we really need to do is transform how people experience care in our state,” said Blue Cross and Blue Shield of Rhode Island’s Wofford. “Right now they struggle to get access to primary care and behavioral healthcare. How do we use our position to transform the experience of care delivery? We can’t sit back and just stay in our traditional payer lane. We want thriving providers in our market, and so we are absolutely ready to invest with them, in the capabilities that are going to help them do super well.”
Some of the insurers emphasized clinical and financial data sharing as a form of integration between payers and providers. Said Blue Cross and Blue Shield of North Carolina’s Goyal: “I look forward to the time when we can continue to drive more and more data sharing in a safe way, in an appropriate way, obviously, but in a safe way that actually helps improve upon the experiences that our members get and improves upon the care that they all get.”
Respond with agility and speed to a fast-evolving market
Several participants reflected on the organizational changes required to respond to the fast-evolving healthcare marketplace and business-model innovation.
“It is really hard to build innovative, new startups within a large company,” said Aetna’s Kane, “It is really, really hard because people are used to operating at scale. They know what they do. They’re really good at what they do. But when it comes to thinking out of the box and creating the right incentive structure and the right equity structure, it’s really hard. Being able to use your balance sheet to effectively, synthetically, create that and still be able to benefit from it as a large company can be really, really powerful.”
Others also addressed the cultural aspect of innovation. “The biggest challenge to innovation is us,” said Holmberg. “Five years from now, we will be a much more nimble organization and even more willing to take on risk.”
HCA’s Rutherford highlighted an organizational approach to encouraging innovation. “We have what we call a special-assets group in healthcare innovation to invest in those companies that have a great idea or product, maybe not fully developed, maybe not in practice, and it is cool to see those grow.”
Added Blue Shield and Blue Cross of North Carolina’s Sonny Goyal: “Three forces in particular are influencing the future of care in North Carolina: provider consolidation, interesting technologies such as AI, and inflation.” In response to that, “we have tried to develop an agile mindset. This means constantly challenging ourselves, and thinking differently about how we approach things, constantly reevaluating our organizational structure, constantly looking for ways to streamline decision making, the ways it will help us handle all these different forces faster than we have over the past 90 years.”