Understanding the Health Care Challenge from a Market and Human Capital Acquisition Perspective

Understanding the Health Care Challenge from a Market and Human Capital Acquisition Perspective Copyright 2007 cors, Inc. 1

Understanding the Health Care Challenge from a Market and Human Capital Acquisition Perspective Over the last several years we have become more familiar with health care issues and the possible impact of not having a viable system for addressing societal needs. Most people have not referenced market changes in the health care system that potentially can improve health care delivery to consumers. Unlike other industries that successfully embrace business and technology transformation with either entrepreneurial vigor or competitive suasion, health care s ability to effectively adapt has been challenged by unique market circumstances. However, the health care world is changing as the industry starts experiencing a number of significant dynamics. These changes will affect hospital administration, care giving, revenue management, long-term patient care, and talent acquisition. These adjustments will revolutionize the patient care experience and health care management. Recent changes include: Basis for Market Competition is changing Health care is experiencing market disintermediation. Pharmacies, Diagnostic Imaging Centers, Acute Outpatient Care Centers, and other providers are offering services to address individual health care needs once provided only by hospitals. In effect, health care is going retail and hospitals might want to consider making alliances with financial service organizations and leverage their IT capabilities to lower operating costs and develop new services. Private Payers are changing The Deficit Reduction Act of 2005 is incentivizing hospitals to become more process and quality oriented. This program will impact future payments made to individual hospitals and cause hospitals to become more focused on meeting patient needs. Private payers are adopting value-based purchasing proposals, forcing third party insurers and health plans to be more transparent in pricing and quality reporting. Technology Changes / Business Practices need to be Questioned New Radiology / Imaging Diagnostic technologies and other diagnostics will transform service practices currently offered by hospitals. Health care providers not making adjustments to current operating practices will incur new liability risks. Third party reimbursement is now calling into question the necessity of these services. This will require a more rationale patient-by-patient use of these resources. Hospitals and Health Care Services organizations need to examine their current technologies from a patient value / wellness contribution perspective. Copyright 2007 cors, Inc. 2

Basis for payment is changing The Inpatient Prospect Payment System (IPPS) context has changed as Centers for Medicare & Medicaid Services (CMS) increases the number of Diagnosis-Related Groups (DRGs) from 526 to 861 while reducing the amount of payment for cardiology, orthopedics, neurosciences, and general surgery procedures. This will cause hospitals to pay closer attention to codes and shift revenue generating attention to other hospital services, while also creating the need for a data-reporting platform on performance information. The Starting Point These dynamics are creating new opportunities and transforming health care value chain models. Recent changes having significant impact on hospitals are DRG management and the processes for how information is communicated and recorded by hospital administration and third party organizations. Because of the significance of DRG function and its impact on revenue, hospital administration must look at DRG management as a significant business process. These changes are creating new career opportunities for health care professionals. New market models, technologies and business practices will create the need for new specialists and functional organizations. For innovative hospital and health provider management there will be a need to examine the health care value chain model from a process, human capital, and consumer perspective and identify market and resource gaps and issues. Understanding organizational talent / resource needs from a consumer view, health care organizations will be in a better position to define functional positions and then process infrastructure models for acquiring new talent. Yet one potential solution to human capital acquisition is the utilization of Outsource Recruitment Models and Recruitment Outsourcing Services for acquiring talent. These business models improve Time / Value relationships and Time-to-Market Performance and have the chance to address a critical health care need; finding new human resources for meeting the increased number of health care needs. Copyright 2007 cors, Inc. 3

Current Market Situation Market dynamics are having a positive and significant impact on health care delivery, cost, and the kinds of alternative health care options available to consumers. Long-term, Wellness Programs will shift the market forces and attention to the consumer as employers become more concerned with the competitive impact of higher health care costs. The Deficit Reduction Act of 2005 will force health care provider organizations to become more market disciplined and customer focused. For hospitals and health care provider organizations, becoming more effective and market oriented will require better methods for accessing, comparing and utilizing information to drive high quality service delivery. Health care management will also need enhanced understanding of their competencies and core capabilities for delivering services and identifying new patient services. With a better grasp of core operations and internal knowledge, health care provider management teams are in an improved position to strategize future market opportunities and determine resource requirements including human capital needs. One of the critical value activities for health care providers is the DRG data management / interpretation function. The DRG management process assists leadership in developing patient care pathways and generating more revenue for the hospital. In addition: DRG also reveals the hospital s foundational knowledge It reflects the capabilities of its doctors to effectively diagnose and record patient illness / medical symptoms and communicate this information to DRG coders With understanding and control of this function the revenue management process is further substantiated and hospitals and health care organizations have better information to define long-term business plans Business plans are more objectively oriented and realistic, health care management is prepared to properly address patient needs, the essence of future market success DRGs will reveal enabling capabilities and the requirements defining the necessary process and human infrastructure for effective hospital / customer administration With a knowledge baseline, health care leadership is positioned to plan. In addition, this practice will provide management with the foundation for achieving sustainable revenue development, improving patient quality / experience, increasing contribution from third party organizations, and enhancing resource planning. More importantly, the DRG process will provide administration with directional information regarding financial capacity to take on new services and initiatives. Copyright 2007 cors, Inc. 4

One of the significant initiatives for health care organizations will be the recruiting and hiring of new professionals. Because of the growing and concerning skill gap in health care, hospital leadership needs to embrace a more innovative and entrepreneurial approach for acquiring new professionals. Some industry experts are becoming alarmed regarding the current and upcoming shortage of health care workers. Hospital leadership needs to embrace a more innovative and entrepreneurial approach for acquiring health care professionals. As an example, Modern Healthcare reported that the 6% vacancy rate in nursing in 2003 could grow to 29% by 2020. Modern Healthcare went on to state that besides the nurse shortage, other skilled positions being affected include home-care workers, nursing home staff, radiologists, pharmacists, and physicians in selected geographic regions. Long-term, colleges and universities are trending to produce fewer health care oriented graduates. Thinking Out of the Box To address the skill gap issue, HR and administration management must consider thinking Out of the Box for developing human capital supply chain and talent acquisition strategies. Supply Chain strategies need to become more non-traditional in terms of approach. Management also has to change their attitudes about age. Saint Vincent Health Center is an example of a progressive pro-active employer willing to consider new recruiting strategies. They are a not-forprofit tertiary care facility located in Erie, PA. As part of their recruiting strategy, Saint Vincent Health Center seeks out potential employees who are over fifty. In fact, 33% of their employees are over fifty years of age and their average tenure is 17.3 years. They have found that employees in this age group are more loyal and very trainable. Partnership Institute in Texas has established relationships with local hospitals and universities in Mexico to assist Texas hospitals in recruiting nurses. In Detroit, Henry Ford Health System, Oakland University, GM, and Daimler Chrysler started a program directed at displaced autoworkers and educating them on the variety of health care opportunities. The program was a success based on initial response. Therefore, creating new supply chain solutions will open new talent sources. Market forces will correct the skill gap. In some cases, hospitals are realizing they are providing too much health care to patients. Other hospitals are realizing that building competencies in various services are not worthwhile unless they are generating new revenue streams. Rationalizing current practices and making changes improves asset utilization and frees up resources for other hospitals and health care organizations. One suggested approach for recruiting is identifying underutilized resources, conducting competitive analysis across the health care value chain and identifying hospitals / health care service organizations offering minimal care value for their services. This will become a more effective process as health care providers begin practicing Gainsharing. One of the values of Gainsharing is that health care provider service quality information is made available to consumers and organizations. Copyright 2007 cors, Inc. 5

HR also needs to start viewing care programs and functional organizations from a business process perspective. Using business process analysis modeling tools, HR organizations gain a better understanding of tasks and issues within a given functional environment / critical value activity. Using information from analysis, HR is able to define new positions and the criteria for each of these positions To assist in this definition process, HR needs to use process scorecards for examining the business and its critical value activities Process scorecards will assist HR in defining new positions, establishing requirements for positions, and building efficiency into the health care delivery process Scorecards should also identify the kind of collaborative, managerial, platform, and process skills needed for performing each function Obtaining workflow information, HR is situated to create new positions. Finding New Talent These approaches provide HR with a good baseline for determining talent needs and finding talent markets. Once research is conducted, health care institutions are ready to begin recruiting activities to obtain talent. Given the current market situation, the question becomes How are new employees identified in less time without significant investments and recruiting burden? To reduce organizational burden and improve business optimization, health care organizations need to consider transitioning to an outsourced recruitment model. Unlike IT and other operational and administrative oriented outsourcing, Recruitment Outsourcing has been around for over twenty years, and is an effective alternative to traditional recruiting. When recruiting projects are properly scoped, processes are sound and repeatable, and there is clear understanding of requirements and expectations, Recruitment Outsourcing is successful. Copyright 2007 cors, Inc. 6

There is sound rational for using Recruitment Outsourcing. Utilizing Recruitment Outsourcing Services enables health care organizations to: Accelerate the recruiting process, delivering viable candidates to hiring managers ASAP Reduce Time to Market and add integrity to the recruiting process Leverage vendors industry experience and databases Accelerate candidate flow Save money, realizing savings of up to 50-60% compared to traditional recruiting and staffing firms Realize process value, processes are easier to manage and more adaptable to change management as new business requirements occur Collect market intelligence Integrate corporate recruiting with outsourcing recruitment process models creating HR Recruiting Value Chain model Enhance strategy development for health care by presenting resource capabilities in either a database or spreadsheet format Target experienced health care professionals who require a more sophisticated approach to make a move To sustain market growth and improve their competitive position, health care organizations must develop more tenacious recruiting strategies for acquiring health care professionals. Health care organizations need to examine current recruiting methods and identify issues impacting current performance. Metrics need to be incorporated into recruiting processes for managing candidate flow and quality. As mentioned earlier, there are emerging market opportunities for health care organizations. However, if management is unable to recruit new professionals to their organizations, achieving market results might be at risk, affecting financial performance and competitive positioning. Copyright 2007 cors, Inc. 7

Achieving Market Success From a market development perspective, health care organizations must develop new products / services to further differentiate themselves from competitors. To assist the market development process, organizations must think about their core business from a Health Care Value Chain perspective and identify market gaps. With new opportunities identified, management needs to start talent acquisition processes focused on acquiring large teams of new professionals by utilizing wholesale recruiting practices. This process requires having human and process infrastructure in place, which in turn enables management to achieve effective large scale recruiting. With infrastructure in place, health care organizations are positioned to recruit and hire more quality candidates in less time. Utilizing Recruitment Outsourcing Services enables health care leadership to eliminate the detail burden aspect of hiring large teams while positioning the core business to grow more effectively. Recruitment Outsourcing Services enables health care organizations to improve recruiting resource optimization and increase recruiting value while reducing cost per hire. Management teams that adapt to Recruitment Outsourcing Services will realize that processes are easier to manage and more adaptable to change management as new business requirements occur. Well-defined processes enable scalability and drive business efficiency; work gets done faster. Recruitment Outsourcing Services positions the core business to streamline talent growth while allowing management to organically address market needs. Given the current industry state, making minor changes to the core business will not create a sustainable market position. Significant dynamics are already occurring across the health care value chain. Because of information and its capabilities, health care organizations are now in the position that they can no longer stand still. The future is now before the health care service industry. It is time act with strategic focus. One of the critical success factors will be human capital acquisition strategy and how to best address the talent need in a resources-constrained market period. Copyright 2007 cors, Inc. 8

Sources Healthcare Financial Management, September 2007, v61 i9, page 60(5) Pay for performance comes to Medicare in 2009 (MEDICARE/MEDICAID), Kim Charland Imaging Economics, September 2007, v20 i9, page 38(2) Shifting sands: Diagnostic Imaging is in the Midst of a Culture Change, Cherrill Farnsworth Revenue Cycle Strategist, September 2007, page 5(1) The IPPS Final Rule: a Road Map to Future Payment; Knowing Where CMS is Coming from Will Help you Adjust to the New IPPS Future (The Complete Revenue Cycle from Cerner), John Travis McKinsey Quarterly, August 2006 US Hospitals for the 21 st Century, Kurt D. Gote, Edward H. Levine, and Paul Mango Modern Healthcare, 33.24, June 16, 2003, Workforce Report 2003, page 24, Patrick Reilly PRNewswire-USNewswire, November/December 2006, Top Western PA Health System Creating Exemplary Policies Toward 50+Employees Council on Foreign Relations, May 14, 2007, Healthcare Costs and U.S. Competitiveness, Lee Hudson Health Care Dynamics and their Impact on Patient Service Delivery and Health Care Institutions, October 2007, Bill DeMarco President of DeMarco & Associates, Workforce Management, August 1, 2004 v83 i8 p20 Texas bridges the nursing gap; Finding talent in Mexico. Hospitals can save up to $10,000 per nurse in recruiting costs Crain's Detroit Business, 2007 Life after the line: Part 2 of 2; Retraining Leads Autoworkers to New Jobs, Eases Nursing Shortages. (Services of Health Care Industry), Jessica Marquez Copyright 2007 cors, Inc. 9