When it is clear to stakeholders that ‘shareholders are our priority’, any inauthentic attempt to suggest otherwise is counterproductive. Prioritising financial outcomes over patients does not work.
Industry observers will be aware that the country’s second largest private hospital provider, Healthscope, has gone into administration following its Canadian owner Brookfield throwing in the keys after having incurred debts of some $4.4 billion.
In response, a number of key stakeholders made comment about the appropriateness of private equity in the Australian hospital landscape. Rachel David, the CEO of Private Healthcare Australia, cited and supported commentary from Ivor Ries in Rampart about “the history of private equity being inconsistent with high quality health care”.
In an article by the Australian Health Service Alliance entitled Does Private Equity Belong in Our Hospitals, the piece stated that patient feedback had Healthscope hospitals lagging “almost 10 percentage points behind the highest rated private hospital group on overall patient experience” and more pointedly:
“The decision of who owns these hospitals cannot solely depend on who’s willing to pay the most. It must also reflect honestly on whether they are going to play a positive role in the Australian healthcare system. We must not risk Australian Healthcare being treated as a commodity business to shore up balance sheets.”
From a personal perspective, I have worked in the private sector under all models – not for profit, ASX and private equity owned. To a large extent, the need to be diligent in financial performance is not significantly different under the various ownership models. In the NFP sector, it is often stated, “No margin, no mission”.
It is worthwhile stress-testing the word mission, as this is where the distinction lies.
Many years ago, when working in the for-profit sector, the executive team was congregated in a room to listen to the wisdom of the managing director. His message? Our priority is to our shareholders.
It was a long time ago, but the words still ring in my ears – the shock was greater for those in the room who were clinicians, who clearly felt that patients should hold that mantle.
As a former hospital executive, I always felt it important to be transparent with the broader team about our strategic aspirations and to update on progress, without disclosing sensitive information. While there may be variations on the theme, in the private sector, the main areas of focus would be:
- Quality of care;
- Patient engagement;
- Staff engagement;
- Doctor engagement;
- Finance.
I’d always be careful about the order of presenting and would never start with a discussion on financial performance – if you took that approach, you could virtually see eyes glaze over and you would lose the audience. However, it is important to address each of the aforementioned strategic objectives, as collectively engaged staff can make a significant difference to the aspirational outcomes of a hospital.
Shareholder interests and equity holders must be protected – I do get it – but if patients are not your priority, then maybe you are not in the right sector. However, it is important to note that the objectives I have dot-pointed are not mutually exclusive – in fact the opposite is true.
Related
Organisations and the teams therein, when they have shared and aligned values, can be the foundation of a wonderful organisational culture. The best workplace I had the privilege of working in had staff, without prompting, reference organisational values when citing the outstanding performance (or indeed the poor performance) of a colleague.
When the culture was at its strongest, that organisation turned its financial performance around by some $50 million within a very short timeframe, despite being in the not-for-profit sector. Needless to say, those shared values did not revolve around finance, notwithstanding the laser focus at an executive level on improving financial performance.
The hospital that I worked with at the time (part of the above $50 million turnaround), provides a good case study to support this contention.
When I started as executive director of the hospital, some two years after it had been established, the hospital had a poor reputation stemming from a significant patient incident that occurred in the hospital’s infancy. This impacted consumer and doctor confidence, making it very difficult to engage with both stakeholder groups. Consequently, financial performance was poor.
A significant strategy to move the dial was to partner with the Studer Group which helps healthcare organisations to drive cultural transformation. Our director of nursing really embraced the Studer concepts, which significantly contributed to improving our desired objectives: to establish protocols to better engage with patients and objectively improve clinical outcomes.
The reputational shift in the community became palpable, which in turn, significantly increased the prospect of doctor recruitment. We became the first non-North American hospital to be awarded the Studer Group Firestarter of the Quarter award. We won Community Business of the Year and also won the Australian Private Hospital Association Private Hospital of the Year. A financial turnaround ensued, to the extent that we significantly exceeded budget. Finally, our staff engagement score was in a culture of success, as measured by Best Practice Australia.
A Gallup Meta Analysis exemplifies this point. Great cultures result in less turnover by some 25%, a 41% reduction in quality incidents, 48% reduction in safety incidents, increased productivity and enhanced consumer outcomes.
My own experience is that when the culture is great, staff are more inclined to give discretionary effort. Clinicians, in particular (the lion’s share of the hospital team), will go the extra mile for their patients, but are less likely to do so for the sake of an extra dollar.
Let’s end where we began. Should private equity interests be allowed to invest in Australian hospitals?
It is not conventional to answer a question with a question, but allow me to bring you back to one: What is the mission of the organisation?
To optimise strategic outcomes, messaging to staff and consumers cannot be primarily about the money. When it is clear to stakeholders that the “shareholders are our priority”, any inauthentic attempt by leaders to suggest otherwise is counterproductive. Prioritising financial outcomes over patients does not work for me and I am sure, many Australian consumers.
If you would like advice on attracting and retaining talent in hospitals or in the broader healthcare sector, please don’t hesitate to contact me or connect with me on LinkedIn.
Vincent Borg is a senior recruitment consultant with Slade Group and former hospital executive.