A view from the Center

Deloitte's Life Sciences & Health Care Blog

Building a legacy: Planning for the health system of the future

In 2004, Kenneth Freeman was the CEO of Quest Diagnostics, a provider of medical diagnostic testing services. He had taken the company from the brink of bankruptcy to one that was sharply focused on the future of health care. He led the company into new business areas with a focus on “cutting-edge procedures” like genomic testing. In the spring of 2004, BusinessWeek ranked Quest Diagnostics number 34 on its list of corporate America’s 50 best-performing companies.

Freeman subsequently walked out the door.

But, this was all part of his plan. Freeman believed that “your true legacy as a CEO is what happens to the company after you leave the corner office.”

Today, many health system CEOs realize that they may step down over the next 10 years, which could be a time of unprecedented change in health care. Payments are shifting toward value over volume, the payer mix is evolving and narrowing profit margins along the way, new technologies are transforming how and when care is delivered, and stakeholders are calling for health care to be more responsive to consumers. Many health system CEOs understand that their successor may be the one to lead the next wave of change and innovation for their health system.

Through a recent survey of 19 large hospital and health system CEOs, Deloitte sought to identify how CEOs are dealing with the pressure and preparing their organization for the future. We detailed findings of this survey in a recent report, “Lens into the future: Health system CEO interviews.” Regardless of their retirement plans, we found that health system CEOs have focused their lens on the future, planning ahead, and steering their organization toward success.

Health system CEOs face many challenges in today’s health care environment. Margins are narrowing as government and commercial payers tighten their reins – the number of hospitals with negative operating margins grew from 9.5 percent in 2012 to 14.5 percent in 2013. New payment models are shifting the focus from fee-for-service (FFS) to value-based care (VBC), and this is mounting pressure on hospitals and physicians to take on more financial risk for patient care. And, as consumers take on more responsibility for the cost of their care, many are beginning to seek better access, more involvement in care decisions, and improved customer service. Deloitte’s 2015 Survey of US Health Care Consumers found that respondents were most dissatisfied with hospitals’ treatment processes, customer service, and skills/specialization during their most recent overnight stay.

When Deloitte asked these health system CEOs to describe their vision for 2025, they identified some core issues that they are likely to be focused on moving forward.

What are hospital CIOS thinking about as they look to the future

Many of the respondents are trying to decide whether to retire within the next five years. These challenges are likely to be a part of that decision.

Ultimately, defining the future is half the battle to succeeding in the future. Regardless of their future within that particular health system, CEOs are working to identify the path forward for their organization. How that path looks will likely differ for each market and health system. As they define their path, they are focused on their biggest needs for 2025: preparing for VBC and identifying the right investments, particularly for VBC-enabling technology.

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Author bio

Dr. Mitch Morris is the Vice Chair and Global Leader for the Health Care Sector at Deloitte, including Consulting, Audit, Tax, and Financial Advisory Services. Dr. Morris has more than 30 years of health care experience in consulting, health care administration, research, technology, education, and clinical care. Earlier, he served as a Senior VP of health systems and CIO at MD Anderson Cancer Center where he was also Professor in Gynecologic Oncology and in Health Services Research.