Economy and Industry and Financials! Oh my!

Scared? Don’t be. You’re safe at your desk or with your cell phone (i.e. pacifier), and you’re far from the dangerous Wolf of Wall Street… Or are you?

If you’re like me, you’ve read oodles of articles about healthcare and heard enough soundbites to think you have the story. Maybe “you’d rather take the butcher’s word for it” and leave it there. Thing is, if you let yourself be a student, and draw your own conclusions after a little research about the state of our economy, industry and financials, I bet you’ve missed a few things, or have been distracted by noise (“Sausage!”) that isn’t so important, after all.

Been awhile since I sat in an Econ 101-102 lecture hall. How about you?

Let’s be students, again, together.

And, Here’s What You Missed..

Since this is part of a series, here’s a quick recap:

Healthcare is continuously evolving. The rapid pace of technical, clinical, economic and legislative changes is shaping the Business of Healthcare. We, collectively, are on a mission to margin: rising costs are unsustainable and regulations demand it.

To survive our mission, we must consider ourselves, market externalities and the resources in our communities. We do not exist in a vacuum, and there is little room for error (evidenced by the 283 community hospitals at risk of closing their doors in 2015).

Be intentional.

How does that old saying go? Measure twice? Cut once?

I’m getting out my tools..

Sizing up our Economic, Industry, and Financial Health

The goal of this post is awareness. Considering healthcare’s accidental wasteland:  what are the relevant economic, industry and financial “monsters” to understand? How are they influencing our business? our decisions?

*Spoiler alert: These “monsters” are imaginary, and if you hang with me through a teensy bit of learning, you’ll see why getting to know them, makes them a whole lot less scary.

Market trends can get complicated, they have layers (like Shrek, and onions!) given the many stakeholders and agendas vying for the spotlight. There are also buzz words that don’t mean much, muddying the waters for us all.

Pause.

Figure out what matters, and start filtering the noise.

Here’s a template to assess relevant economic, industry and financial measures, so we’re aware of what’s lurking in our backyard. Go through, pencil in a few updates before your next big decision or strategic planning meeting. See if consistent lenses improve your monster-vision.

Take what you like, leave what you don’t, and add what’s missing.

We won’t be offended (and neither will the monsters..)

Measuring the Large Economic Monster:

Depending on who you talk with, there are around 8-12 leading economic indicators (LEIs) for the US economy. They’re standard, free and released to the public monthly or quarterly. Here’s a look as of September 7, 2015.

(If you aren’t already familiar with LEIs, here are a few sources to get you started: LEIs Explained, Investopedia, US Census Economic Indicators )

To be sure we’ve got a shared mindset, let’s also review my assumptions:

  1. We’re predicting the health of the US economy over the next 6-9 months.
  2. The Magic 8 Ball can (and should) be shaken again and again, especially, if you don’t like its first answer about your future!
  3. These leading indicators affect industries differently; we’re thinking about healthcare.
  4. LEIs are interdependent, related and sometimes redundant.
  5. LEI’s highlight opportunities and risks.
  6. I’m not an economist, and filling out this table won’t make you one either.

Due to formatting constraints, here’s a link to the full table with actionable links.

Key takeaways: Consumers are modestly comfortable but will be expected to carry the burden of rising costs of healthcare. Meanwhile, health systems are looking for ways to increase productivity by substituting human capital with technology, and looking for improved efficiency through investment in preventive (ambulatory) services. There will continue to be a widening gap between supply and demand.

Measuring the Ugly Industry Monster:

LOTS of topics could fall into this section, we’ve organized around supply and demand, to keep things simple, and illustrate the imbalance we’re experiencing. I hope you’ve got your sea legs on, to meet this giant-squid-of-a-monster:

Key takeaways:  Demand for health care continues to far outstrip the supply of health care services.  Intense and intentional focus must be placed to decrease demand for health care while identifying innovative and/or disruptive ways to increase the supply of health care resources.  Until equilibrium is reached, healthcare costs and complexities will continue to skyrocket.  Delivering greater value (outcomes relative to costs) from each of us, as stakeholders, is essential to improving balance in these rough waters.

Measuring the Frightening Financial Monsters: Solvency, Effectiveness and Profitability

Now that we understand the broader setting, it’s time to take a look at our organization, and its frightening financial monsters!!

How well are we managing our cash? How effectively are we utilizing our assets? How is our organization performing?

We can apply these measures to anything (even our personal finances) and by benchmarking with relevant peers and competitors, we gain meaningful insight into our unique opportunities and challenges.

Focus. (It makes it less scary… I promise.)

It only takes a few minutes to crunch these 8 ratios, and by using consistent lenses, we’re able to see patterns and questions, hidden in our balance sheet and income statement. Take a look.

Key takeaways: In this example, we appear to be lagging behind industry peers. Focusing on the above 8 ratios to measure solvency effectiveness and profitability will save us time and offer insights. The balance sheet and income statement don’t tell the whole story, so walk away with questions, not conclusions about your monsters!

What does this mean for the Business of Healthcare?

Okay, I’ll admit we are at least a yellow brick road away from these monsters being our imaginary friends… And that’s fine. We don’t have to know all of the answers, yet. We’re starting with awareness, and I have learned a lot! You?

The measures above show that healthcare, as an industry, isn’t delivering value that is equitable and balanced from a health and wealth perspective. Singular approaches such as ONLY cost shifting, ONLY legislating, ONLY narrowing networks, et cetera are short-sighted, and won’t be enough.

Fast-paced monster trends and health care reform are quickly changing long held assumptions about business models, market positions and required capabilities thus accelerating our need to rethink, redesign and realign priorities. It is everyone’s responsibility (individuals and organizations) to transform the delivery of health care.

Three strategic and interdependent business initiatives form the foundation of this transformation:

“Rule 1: Cardio.”

Just kidding, it’s all about speed!

Speed to Value (costs)  Speed to Market (commercial)  and Speed to Trust (culture)

Don’t know what I mean?

Guess you’ll have to read the next post….

Until then, don’t be afraid to look under your bed at your frightening monsters. Take this and make it your own.

Blog site: The Accidental Wasteland

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