Taking Back The Business of Healthcare with Preston Alexander | E. 67

The Healthcare Leadership Experience

US healthcare costs are the highest in the world, yet health outcomes lag behind other countries. Preston Alexander shares his mission to prioritize patient care and clinicians over profit with Jim Cagliostro.

Episode Introduction

Preston explains that the principal issue with US healthcare is its profit-driven approach, why healthcare must be a forward-thinking Netflix, rather than an obsolete Blockbuster, and why the nursing shortage is the result of a broken system. He also emphasizes how understanding the line item hospital costs can significantly benefit clinicians, and the importance of an empathetic mindset.

Show Topics

• The current path of healthcare is unsustainable

• Turn the ship around or build a new one?

• Clinicians need to understand the business of healthcare

• The ability to analyze financial statements is an invaluable skill

• Hospitals benefit from having clinicians in leadership roles

• Preparing clinicians for leadership

06:08 The current path of healthcare is unsustainable

Preston said the profit driven nature of healthcare is leading to higher costs and poorer outcomes.

‘’. .. I think the primary issue that I see is that, and you talk about systems level problems, is our healthcare system operates within a much broader context. The context being a system of capitalism. And it was created in a way, in more modern times, I suppose, if you want to look at it that way, to maximize profits. And all the systems we've designed have created a little bit of a bifurcated system whereby you have wealthy individuals who are covered by insurance and can afford all the out-of-pocket fees and charges they have to pay if they need healthcare. And then the rest of the population who's functionally uninsured or underinsured or doesn't have insurance at all, and then what they can access. So, if you wanted to just really take one big giant swath, like what's the problem in healthcare, is that it's fundamentally profit driven first, and healthcare fundamentally is a function that can't be delivered appropriately to everyone with profit being its primary driver and outcome. We see examples of it all over the place. You have insurers who are supposed to help you avoid catastrophic costs related to healthcare, who make... United Health Group, I think in 2022 profited $20 billion or something like that. So you're just talking about outrageous numbers. It made, I was just looking at their financials this morning actually, $340 billion in revenue. And it's like, what are we getting for it? More expensive treatments, more cost, worse outcomes, lower life expectancy, less access, more people left behind by financial design.’’

09:51 Turn the ship around, or build a new one?

Preston said the broken healthcare system is the cause of the nursing shortage, but change is possible.

‘’… I am still going to believe, and I'm probably wrong, but that we can turn the ship because systems are what drives everything.... It's what we see with all the nursing shortages right now. We don't really have a shortage of talent, but we have a brokenness of systems. Today, we're 300,000 nurses short. If I gave you 300,000 nurses tomorrow, we'd be short again within a year or two because the systems are broken. You can't just throw good people into a broken system. But people design systems, people can change systems. So with that sort of premise foundation, the ship could be turned. We could turn the Titanic, but it's going to take leadership, it's going to take people at the top, it's going to take bottoms-up approach. It's going to take a lot. It's not an easy thing to do, neither is building a new one. But that's the alternative. We can try our hardest and get our CEOs on board or the people in charge or mutiny so they have to listen to us or whatever the things are. Or you can say, we're going to just do something different, not to minimize it in any way, but we're going to make Blockbuster obsolete. We're going to be Netflix. We're going to create something totally different and not even disrupt the system because it's so useless to us. So we're just going to go over here and do something else…..So it's, what can you do to build something outside of that traditional healthcare system? And I think both ways can work. I honestly think building a new ship is probably the best solution at this point, although I don't totally want to believe it because there's a lot of meaningful infrastructure. But also once you build a new ship, everybody aboard the old one's going to want to come over there and you can really access a lot of that existing infrastructure in positive ways.‘’

14:18 Clinicians need to understand the business of healthcare

Preston emphasized the need to prioritize patient care and clinicians above profit.

‘’We have this big underserved population. And this hospital was dragging down the bottom line of a big not-for-profit health system that makes plenty of profit, believe you me. And so they closed the hospital. And that hospital had a lot of problems. It was under-invested in for a long time. It has a troubling financial population, but they approached it the wrong way. It was finance only, right? Like, "Let's just bottom line, little investment, and then let's get out of this and not take the black eye." But you can do the right things, but also understand the economic realities, like how do you invest in a new parking deck? Which they needed, because they had a condemned parking deck. You know what I mean? So bridging that gap, I think really helps everybody. So in the first way, it's just to get on the same page. We need to do the right things for patients. We need to do the right things for clinicians, deliver the best care, highest quality, all that stuff, first and foremost, absolutely. But then how are we going to cover it and pay for it and actually deliver it and pay people well and pay people fairly? Those are just the economic realities of the broader systems that we live and operate in. And so people always talk in a way that's like, it's either or. And I think it can be both. And I also firmly believe that if you do the former, which is start with patient care in mind, quality, safety, take care of your clinicians, the profit and the money takes care of itself on the backside. And I mean, we've seen examples of this before.’’

19:55 The ability to analyze financial statements is an invaluable skill

Preston said understanding financials gives clinicians insight into what’s really happening versus ‘’red herrings.’’

‘’But then more applicable to our conversation, I just think it's really beneficial, again, to my previous point, of knowing what goes into and what's required to operate a large organization. When we look at hospital financials, you see line items, and I think staffing costs are the biggest line item of any hospital. And you see that it's, I don't know, $13 billion. You're like, "Oh, whoa, wait a sec, I didn't realize that. What goes into all that?" Or you see supply costs $20 billion, and you're like, "Man." But in the same breath, you see revenue, $150 billion. Not for a hospital, it wouldn't be that much, but whatever it is. $14 billion or something. It starts to shift your perspective a little bit and you start to see, wow, these are really big, a lot of moving parts and pieces. Here's what goes into it. It's also a way to see the red herring where it exists, because in healthcare we have a lot of issues and then everyone's going to spin it in their own particular way.’’

24:53 Hospitals benefit from having clinicians in leadership roles

Preston said clinicians can help hospitals to make better decisions on costs.

‘’Some really great, awesome tech wizard, hoodie-wearing guru comes in and sells this awesome vision and then the C-suite says like, " We're going to make this extra money. We're going to reduce costs here," And then you go to implement this $5 billion whatever thing you just signed up for. And then all of your clinicians are prepared to mutiny because you just jacked their workflows in an incredible way. And they're just like, "How much more work do you expect me to do to realize this sort of pipe dream that somebody sold you? And had you just had the previous chair of surgery now working in a nonclinical leadership role, who could have been in on those conversations?" Not to say that every hospital leaves clinicians out of the discussion, but I mean, they're a minor part. But when you can be at the table and say, "This is a terrible idea. Do you know what this is going to do to our workflows? This is not a good investment." So it can help really dictate not only don't cut this cost or don't cut this cost, it can really propel the financial health of an organization forward in meaningful ways too, to say, "We have these resources. This is where they'd probably be best allocated for patient care, for patient experience." And it's like, "And here are the returns that you can get from that improvement in patient care and experience." Because I think that's just such a big piece that's missing is the short-sighted financial management to lower expenses and maximized revenue.’’

27:19 Preparing clinicians for leadership

Preston said building relationships with people in nonclinical positions can empower clinicians for leadership roles.

‘’.. I think the one thing that is super powerful and helpful is just to make friends with people who are in nonclinical positions. So I talk to people sometimes who wanted to make that jump in administration or something, and I say, "Well, go spend time in the purchasing department with supply chain, go set up internal meetings." I used to do this all the time in my previous companies. And I mean, listen, I get it. Everyone's super busy. And when you're on shift, bless you if you can find a bathroom break time. It's hard. You know what I mean? I totally understand that. But it can be very, very meaningful and helpful not only from a political want to move around in an organization perspective, but from a learning perspective is when you can make those relationships and talk with the director of accounting, VP of finance, chief of investments, whomever those people are who are close to the money, the revenue cycle management folks to build those relationships. And more often than not, I know people are strapped, I get it, but you can forge some relationships and start learning that business aspect coming from the angle of what is it that you do? Help me understand. I want to be a better X, Y, Z. So I just really would love to understand what are you dealing with all day every day? What are the practicalities? What would make your job easier? What makes it super hard? What's the most important thing to be successful in this type of position? And then you can really start to learn those fundamentals and the mechanics and the big drivers of that type of thing. ‘’

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You’ll also hear:

Preston’s career journey and his motivation to understand the business side of healthcare. ‘’I would have people write to me saying that they had stage four cancer, they couldn't afford our products, but they're the only things that helped them. ….So never really sat right with me and I just didn't understand what was going on. So I launched myself into understanding more about healthcare from a business perspective.’’

Living with economic realities, but moving away from a ‘’finance only’’ approach. ‘’The famous phrase was like "no margin, no mission" coined by a nun way back in the day with one of the Catholic nonprofit health systems. And people say that a lot, but they just mean it to justify profitability…. But you can do the right things, but also understand the economic realities.’’

"That’ll be $10,000. Cost of a hammer, $5, knowing where to bang the hammer….’’ How an engineering anecdote encapsulates the need for clinicians to understand hospital line item costs.

Why it all comes down to ‘’infusing more empathy in everything we do.’’

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