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Recently I had the opportunity to participate in an annual event called Dallas StartupWeek. This event provides a forum for innovators, investors, entrepreneurs, incubators, founders and anyone interested in starting a business to network with just about anyone that has something to do with innovation and startups. The week includes programs focused on everything from gaming to social causes. Healthcare was one of the areas of focus. There were several panels consisting of entrepreneurs in the midst of startups, innovation leaders from several large DFW health systems and business leaders of organizations that had made it out of the startup-phase.

Interesting stories about various challenges that were encountered, challenges of breaking through the obstacles of the current incumbents, marketing to consumers services never marketed before were just a few of the interesting topics covered. One panel was comprised of a member of each of the current generations-silent generation (pre 1945), baby boomer (46-64), generation X (65-76), millennial (77-95) and generation Z (96-present). Current views on healthcare topics were asked and the different generational views provided. Needless to say there was a great deal of variety.

This will sound like a blinding glimpse of the obvious-innovators see the world differently and in some very original ways. They have an enthusiasm that becomes contagious. Intentionally or unintentionally when they talk, conventional wisdom and current paradigms seem to be in jeopardy. I found the stories the leaders took to get to what ultimately became the final organization fascinating. Starts, pivots, near death, great success followed quickly by great failure and recovery were constant themes. The critical importance of leadership teams became evident. When dramatic change was necessary, called a pivot, teams became critical as not being able to change would in most cases result in organization mortality.

These sessions were even more impactful because we (Royer- Maddox- Herron) have recently had our book on leadership, management, and transformation published. After reflecting on these startup stories, I know our intention was to be as candid, direct and urgent as necessary, however, in hindsight we might not have gone far enough. This past week Elizabeth Rosenthal’s book, An American Sickness, was released. This is another, in what is getting to be a very long list of books outlining, in ever increasing detail, the multitude of shortcomings of the current U.S. healthcare model. To add fuel to the fire, Universal Health Service’s SEC annual proxy filing disclosed their CEO’s compensation for FY 2016 at $51.3 million. This follows from a few months ago Anthem disclosing in their proxy filing CEO compensation of $17.1 million. In addition, Congress people home on recess and hosting town hall meetings are being pummeled with healthcare issues.

Here’s the warning. Many hospital organizations are very short on leadership talent. In some cases this is by design, because the healthcare environment didn’t require leaders as much as really strong managers. Where turnaround situations existed and leadership was necessary, oftentimes hired guns from the outside were brought in to right the ship and then departed. Historically, financial success in healthcare has largely been a function of doing things right. Very seldom was the question asked “are we doing the right things?” And if it was and the answer conflicted with the status quo it was soon tabled. The variable managers/leaders focused on was volume. Prices were pre-negotiated with insurers or predetermined by the government. And seldom did they ever go down. The questions are soon to be, “Can you pivot?” and “Can you lead?”

The first obstacle you’re going to face is the proverbial medical staff vote of no confidence. Why? Because you’re going to want to stop doing stuff that should have been stopped 10 years ago or start doing stuff that’s now going to compete with your doctors. The second obstacle you’re going to face is general associate unhappiness because people generally don’t like “to be” changed. Third, the boardroom is going to become contentious because board members are starting to be asked “what’s going on at the hospital?”at the beauty salon or country club. Or in some more intense circumstances, “are you sure you know what you’re doing and why didn’t you do it sooner?” In modified form, these were the types of questions the startup innovators had to deal with during their organizations’ developmental process.

Unlike during previous periods of change in healthcare, there haven’t been significant competitive pressures from outside traditional industry providers. This time will be different, if for no other reason, technology. Inherent in every startup story I heard over the course of the week was a technology component that enabled the new organization. Technology has a way of overcoming the protective
“moat” that has prevented the more routine competitors from entering the healthcare castle. The second factor is the massive amount of investment that’s searching for the “Google” of healthcare. We have seen the optimism of Wall Street in the Castlight IPO. We’ve seen the rise and fall of venture capital exuberance with Theranos. So the two major barriers to competing in healthcare are no longer barriers.

There will be numerous naysayers that healthcare is different. It’s too complicated. It’s not like going to Walmart. It’s not like shopping on Amazon. It’s not like booking a flight on an airline. And all those people are correct. But remember before there was health insurance there wasn’t any. Before the government decided to accelerate the building of hospitals through Hill-Burton grants, they were locally funded. Before there was Medicare, there wasn’t anything. Healthcare has always been different. But all of what has largely made healthcare different (complicated) was at one time an innovation. And to think innovation has run its course in healthcare is just plain stupid.