The Attack on Non-Profits

I previously had written on the attack on healthcare with the movie "Sicko" by Michael Moore. Mr. Moore is merely a director who's goal is to shock the public into buying tickets. Healthcare is now up against a more formidable foe, the federal government. The Internal Revenue Service is introducing drastic changes to the way that hospitals must file their taxes. The new form 990 is going to require hospitals to describe the charity that they give to warrant their charitable status. Until now, hospitals have had to do one of three things to prove their worthiness.

1. Maintain an Emergency Room and keep it open regardless of patient's ability to pay

2. Subsidize or give free care to patients

3. Provide an unmet need to the community

Hospitals are being challenged about their tax-exempt status. Executive teams and boards will need to review these new rules to make sure they do not put themselves at risk.

It Just Makes Me Sicko

I'm going to attempt to bring together two of the articles that I read today:

The first was an article by the McKinsey Quarterly, which I must say is a must read for all health care professionals. It gives a great overview of business as a whole and ideas can be taken from the articles about other industries and related to health care. Anyways the article was titled, "Ten Trends to Watch in 2006." Not very current, but useful all the same. Of particular interest to me was trend #6, the role and behavior of big business will come under increasingly sharp scrutiny. This trend didn't take a great amount of foresight, but it is beginning to take hold of the health care industry.

Which leads me to the second article I read today on the Alan Katz Health Care Reform Blog. This article discussed the new documentary by director Michael Moore titled, Sicko. Mr. Moore's goal is "to eliminate private, profit-making health-insurance companies." Mr. Katz discusses in several postings about how Mr. Moore's film is created to mislead the public into thinking that a single-payer system is the solution to the U.S. health care problem.

I have written before about the need for members of the community to come together to help improve the health care system as a whole. It is my opinion that big business and insurance companies are not "bad", and don't need to be attacked in any manner. Health care workers need to fight this label that is being put on them that they are only interested in profits and care nothing for the people. Mr. Moore's work does allow for the discussion to take place on a larger scale, but it is destructive in a manner that brings us farther from a solution.

Interesting Health Care News

Medicare is using a little common sense - click here

Some thoughts on charges and quality - click here

Mission Impossible

Everyone has to have a mission statement. At least that is the conventional wisdom that hospital have taken from the for-profit world. I've been looking at many mission statements from various types of institutions and find many of them lacking. In particular, I looked at mission statement for these institutions.

Johns Hopkins Hospital -
To be the world's preeminent health care institution
To provide the highest quality care and service for all people in the prevention, diagnosis and treatment of human illness
To operate cooperatively and interdependently with the faculty of The Johns Hopkins University to support education in the health professions and research and development into causes and treatment of human illness
To be the leading health care institution in the application of discovery
To attract and support physicians and other health care professionals of the highest character and greatest skill
To provide facilities and amenities which promote the highest quality care, afford solace and enhance the surrounding community.

Google - Google's mission is to organize the world's information and make it universally accessible and useful.

Aetna - Aetna is dedicated to helping people achieve health and financial security by providing easy access to safe, cost-effective, high quality health care and protecting their finances agaisnst health related risks.


When I look at these three statements, I think about how useful they are. If I had to rank them they would be Google as the best and Hopkins as the worst. The reason being is that I believe a good mission statement is short, concise, but not vague. As an employee at Google, I would know what to think about to bring value to the organization. At Hopkins, I'm not so sure.

Interestingly enough, I looked up the mission statement of a hospital in Maryland that I knew was having financial and operational difficulties. The mission was no where to be found. This teaches us that short is better than long, direct is better than vauge, but something is obviously better than nothing.

Cash Buffetology

Use your cash wisely, invest in organizations that provide real value to your stakeholders. Growing a hospital is a difficult operation. Hospitals don't have the margins and cash flows to make big aquisitions. We can't use this as an excuse, but should use it as reason to invest our cash more wisely.

Many people know Warren Buffett as an extrordinary investor, but I look at him as an incredible businessman who knows how to grow an organization. Hospitals should look at Buffett's growth strategies as a means of minimizing risk and running high class operations.

There are two Buffettisms that I think are applicable to hospitals:

1. When others are greedy that is the time to be scared, and when others are scared, that is the time to be greedy. One thing I have learned from Mr. Buffett is that sitting on cash and waiting for the right opportunity is infinately smarter than spending cash on the next hot thing that comes along. Not too long ago, hospitals went on a craze of merging with other hospitals in hopes of aquiring economies of scale. They didn't look closely at how they were using their cash, only that they didn't want to be left without a dance parter.

2. Aquire organizations that have a position in the market that is impervious to price fluctuations. Another business can always slash prices to compete, but not all can provide a service of such value that price is no object.

All investors are instructed to read Buffett's chairman's letters for guidance. Hospitals should give it a try.

Photo courtesy of Forbes magazine

Better Use of Charity Dollars

Last week I attended a golf tournament to raise funds for a hospital in my community. The event was a great success for the hospital which raised over $100,000. Last week I wrote about more effectively using our health care dollars to improve outcomes. It is only my assumption, but I would guess that money raised at events such as this used to fund new equipment or buildings for the hospital to use to improve their care for their patients.

Then I got to thinking...is this really the best use of all of these charity dollars? New buildings and equipment are great and I know they do a lot to advance patient care, but there may be a better return on that investment. I think that it would be more economically advantageous for the hospital to use the money raised through charity to more efficiently and effectively take care of their poor population. This may include funding studies regarding throughput or workspace design. Anything along those lines would not only have an immediate impact on the poor population, improving the health of the community, but would also have a long term return regarding all patients.

Political Reform in Health Care

The basic purpose of any insurance is to provide a safety net incase some unforeseen event occurs in one's life. When insurance works it appropriately, it covers an event that can have a high impact, but has a low probability of occuring. This is where we are going wrong with our thinking of paying for health care.

In today's Washington Post, Steven Pearlstein writes about the democratic strategy for health care reform. He speaks about two of the candidates, Hillary Clinton and Barack Obama. He contrast Mrs. Clinton's approach of attacking the insurance and pharmaceutical companies for making "unreasonable" profits with Mr. Obama's approach of coming up with a solution that satisfies all constituents. While Mr. Obama's approach sounds nice, he still places much of the blame on the pharmaceutical and insurance companies for profiting from health care.

I think the best approach for any candidate to take is not that there are evil constiuencies out there that are preying on the American people. The American people seem to want to comsume a large amount of health care services, and there is nothing wrong with that. What is wrong is with all the money that we are spending as a nation, up to 15% of GDP, we are one of the least healthy nations in the world. Our inputs are producing very little return on investment.

Return on investment is something that for-profit companies know very well. So instead of placing blame on different parties, maybe we should enlist their expertise and help to find a solution that improves the output of our consumption, better health.

Here is some more coverage of Barack Obama's health care plan.