Healthcare Innovated: Leading through Change

Jodie Granger

Executive Advisor | Healthcare | Innovation | Strategy | Growth | Adaptive Change | Digital | Design Thinking | Advisory - Talks about #Innovation, #Healthcare, #Strategy, #HealthcareInnovated, and #adaptiveleadership

Published Oct 2, 2024

Welcome to our latest newsletter, where we explore more from the ever-challenging landscape of healthcare. From workforce shortages and operational inertia to systems integration and leadership challenges, healthcare leaders face numerous complexities.

In this edition, we discuss the pros and cons of private equity funding, inspired by Healthscope's recent campaign. Additionally, don’t miss our upcoming webinar on accelerating impact in healthcare.

In this edition:

Navigating the Complexity of Healthcare: Lessons from Real-World Challenges
Impact in Healthcare: A Blueprint for effective change - Free Live Session
The Pros and Cons of Private Equity Funding in Healthcare

Navigating the Complexity of Healthcare: Lessons from Real-World Challenges

Healthcare organisations are grappling with significant levels of complexity and transformation, particularly within aged care and home health sectors. The landscape is nuanced with regulatory changes, workforce shortages and system integration challenges. Reflecting on my experiences with various organisations from recent times, here are some key insights into the key themes which present across the industry.

Workforce Shortages: The Core Challenge

In healthcare, the shortage of skilled staff remains one of the most pressing issues. Whether in aged care, allied health, or home care, recruitment and retention challenges are pervasive. Organisations must align their workforce strategies with client needs to improve care quality.

For instance, aged care organisations face pressures from both occupancy rates and staffing shortfalls, affecting compliance with entities like the Aged Care Quality and Safety Commission (ACQSC). Similarly, allied health services especially those in the disability sector, confront staffing hurdles with high turnover, there is a desire to offer a wider amount of variety of work for retention yet their scepticism around diversifying services due to variable funding.

Home care organisations must also address rostering and resource optimisation, striving to better align staff with client demands. Without these improvements, the quality of care suffers and operational efficiency is compromised.

Operational Inertia: The Risk of Stagnation

Resistance to change is a significant barrier in healthcare. Hospitals and other health systems frequently cling to outdated methods, missing out on potential profitability and enhanced patient care.

An example from my experience involved a hospital group that faced considerable inertia, impeding their ability to implement new referral and models of care effectively. This resistance, deeply rooted in organisational culture, can lead to stagnation.

Digital health companies encounter similar challenges. Misaligned priorities and a focus on short-term gains rather than long-term customer value can result in technical debt and hinder progress. This was evident in a digital health company where leadership challenges and conflicting priorities slowed decision-making and alignment across the organisation.

Systems Integration: Achieving Scalability

Healthcare mergers and acquisitions often lead to the challenge of integrating disparate systems. For home care and health organisations, overhauling core systems is essential to maintain scalability and explore new opportunities.

One home care organisation I worked with needed significant system changes to unify the business and support scalability. Similarly, digital health scale-ups often face constraints due to funding limitations and resistance from traditional medical groups, which slows progress and innovation.

Leadership and Regulatory Pressures

Effective leadership is crucial in navigating the realms of digital health and AI-driven healthcare solutions. Leadership teams often face conflicting priorities and decision-making delays, impeding progress towards customer-driven goals.

In aged care, organisations must adapt to regulatory shifts like the AN-ACC and Support at Home while managing complexities brought on by mergers and acquisitions. Sustaining profitability amidst these pressures is a significant challenge.

For private health insurers, adding value to customers through support and hospital substitution is essential to reducing claim profiles and improving customer satisfaction. However, siloed teams and a lack of alignment can obstruct these efforts, leading to frustration within and missed opportunities.

What next?

Healthcare is more complex than ever before, but leaders who embrace these challenges head-on can drive meaningful change in their organisations. From optimising workforce management to breaking free from operational inertia, integrating systems for scalability and aligning leadership priorities, the most effective leaders understand that navigating complexity requires both agility and strategy. There is not just one way to approach these issues and understanding the risk, uncertainty and urgency of the issue can create more accelerated ways to achieve greater impact. Consider cost of delay (CoD) and other prioritisation models can be a good way to make rapid decisions with right approach to execution.

Accelerate impact in healthcare: A Blueprint for effective change

The Pros and Cons of Private Equity Funding in Healthcare

The AFR recently published a piece asking if private health equity is unhealthy for our hospitals Private equity (PE) funding has perhaps been both a blessing and a curse for the healthcare sector, drawing mixed reactions from industry stakeholders. This dichotomy is epitomised by Healthscope's recent public advertising campaign aimed at securing more money from insurers, highlighting the tensions and complexities inherent in private equity’s involvement in healthcare.

Pros of Private Equity Funding

Capital Injection: Private equity injections have enabled healthcare providers to acquire advanced medical technologies, enhance facilities and expand their services. For instance, Healthscope has invested substantial sums into upgrading its hospitals, thereby potentially improving patient care and operational efficiency.

Efficiency and Innovation: PE firms often bring a fresh perspective to healthcare management, introducing innovative business strategies and operational efficiencies that traditional healthcare providers may overlook. This can lead to streamlined operations and better resource utilisation.

Scale and Expansion: Private equity investments have allowed healthcare providers to scale up quickly and effectively. This has been evident in sectors like dental, pathology and radiology, where PE-backed companies have achieved significant growth and profitability.

Rescue from Financial Distress: For struggling healthcare entities, private equity can act as a financial lifeline, preventing closures and ensuring continued patient care. Without such investments during economic downturns or crises, more facilities might face operational shutdowns.

Cons of Private Equity Funding

Prioritisation of Profit over Patients: One of the most significant criticisms of PE in healthcare is the emphasis on profitability, which may come at the expense of patient care. Insurers argue that Healthscope's demand for more funds stems from poor financial decisions rather than patient-centric motives.

Debt and Financial Strain: PE buyouts often saddle companies with high levels of debt, as seen with Healthscope’s $1.6 billion debt burden. Rising interest rates, in combination with increasing operational costs, can strain financial health, limiting the ability to invest in patient care.

Cost-Cutting Measures: Cost-cutting measures imposed by PE firms may lead to reduced staffing levels, threatening the quality of care. Critics point out that these cuts can lead to a decline in service quality and potentially higher rates of patient complications, such as infections and even mortality.

Short-Term Focus: The short-term profit outlook of many PE firms can undermine long-term investments in healthcare innovation and infrastructure. This misalignment can stifle advancements in treatment methods and patient care innovations.

Market Instability: The threat of closing unprofitable hospitals to manage financial health adds instability to the healthcare market, creating uncertainties for patients and putting pressure on the public health system.

Private equity funding remains a double-edged sword for the healthcare sector. While it provides much-needed capital and can drive efficiency and expansion, the emphasis on profitability can sometimes overshadow patient care and lead to adverse outcomes. Thus, the challenge lies in balancing financial viability with the ethical responsibility of providing high-quality healthcare. As healthcare leaders, it is crucial to navigate these waters carefully, advocating for actions that align financial success with superior patient outcomes.

A funny from Nursergram – I am sure many can relate!

Contact us to learn more about Healthcare Innovation. How to innovate in challenging times and create the space to grow, without the trade-offs.

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