Cost structures in search of revenue

A colleague recently quoted a Harvard Business School professor (I forget which one), who said “Businesses are cost structures in search of revenue streams.”  I don’t know this professor or what he had in mind exactly, but I want to offer my interpretation.  I believe that what he was suggesting that, no matter how innovative or entrepreneurial a firm might have been at its start, once it is has been in existence for some time and has an established place in the social economy, its goal in life is to persist.  It leaves the world of innovation, often loses its purpose, and exists solely to exist, i.e., to cover its costs.  Often this is a reflection of the corporate hierarchy, where, sadly, leaders lose their sense of providing true value to their customers, intent instead on aggrandizing their own position and preserving their status.  The firm no longer reflects the creativity of risk-taking, becoming a bureaucratic shell of its former glory.

A good friend of mine, a retired doctor, has been pestering me for years on this topic, saying that this is what has happened to many of the formerly great hospitals in America, particularly the academic medical centers.  She views this as a relatively recent phenomenon.  She does not assert that the doctors and nurses are any less caring or dedicated, but rather that the leaders of these centers have become calcified with regard to their social mission.  They focus instead on expanding market share, growing margins, and attracting philanthropists to contribute to unnecessary and flamboyant edifices.  They have no real interest in reducing costs, but rather in obtaining and securing revenue streams to cover ever-increasing costs.  Most importantly, they neglect the harm they cause to patients in their facilities, preferring to assert that they deliver high quality care without being willing to be transparent with regard to actual clinical outcomes.  When they are shown data that indicate that their levels of care are no better than others, or perhaps worse, they answer that “the data are wrong” or “our patients are sicker.”

I have been agnostic with regard to my friend’s assertions.  For one thing, my experience in the medical field is of more limited duration, so I could not ascertain whether the change she suggests has occurred.  For another, I am more optimistic in nature than she, and so I tend to see half-full glasses rather than half-empty ones.  Also, I have been lucky to spend lots of time with hospital leaders like Paul Wiles, John Toussaint, Gary Kaplan, Jeff Thompson, and Ora Pescovitz who represent the vanguard of those focused on the things of most value to the communities they serve.

But this week, I was informed of an event that has shifted me more into my friend’s camp.  In response to a top ranking by US News--a ranking that, as I have discussed, has virtually no probative value--a local hospital actually organized a celebratory parade of an amphibious tour boat (Duck Boat).  In the past, such parades (admittedly more extensive) have been used to promote the championship seasons of local sporting teams (like the 2007 Red Sox, above), thereby giving fans a chance to yell and scream and applaud their athletic heroes.

Now, I am all for celebrating accomplishments.  At my hospital, we, too, used to be happy about favorable media ratings, even if we knew they were fundamentally meaningless.  But to spend thousands of dollars on a self-aggrandizing circuit (as well as on the right to use the US News logo in publicity) seems to me to reflect exactly the kind of behavior suggested by my friend.  How does this kind of activity promote anything good or useful about the provision of high quality and safe health care in the community?  It appears to be mainly a commercial activity designed to garner market share and otherwise stimulate revenue growth for an entity that, as I have noted, could do so much more to demonstrate a commitment to the kind of care that some of its own faculty and that of other institutions has been shown to save lives, reduce morbidity, and lower costs.

This Duck Boat rally is especially noteworthy when you read the actual words of the editor at US News who notes that the rankings are "to help those who need an unusual degree of skilled inpatient care decide where to get it, especially when there's time to make a choice."  Indeed, the parade is essentially celebrating a nullity when it comes to the day-to-day needs of the community in which this hospital is located.

I yearn for the day when the hospitals in Boston get together and jointly demonstrate progress in eliminating preventable harm, adopting a consistent approach to front-line driven process improvement, and engaging in truly patient-driven care.  Now, that would be something worth celebrating (although I would still omit the Duck Boats.)  For models of that kind of behavior, look west to Ohio, Wisconsin, Washington, and Michigan.  The hospitals there have been hard at work on that approach--with modesty, dignity, and class--literally leaving many "top" Boston institutions in their wake.