CALPACT Lecture: Leadership and Management with Leonard Schaeffer

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In this session, part of our Innovative Leaders Speaker Series, Leonard Schaeffer, Judge Robert Maclay Widney Chair and Professor, University of Southern California, and Founding Chairman & CEO of …

In this session, part of our Innovative Leaders Speaker Series, Leonard Schaeffer, Judge Robert Maclay Widney Chair and Professor, University of Southern California, and Founding Chairman & CEO of WellPoint discussed his perspective on the roles of leadership and management in large organizations, based on his experience in the public and private sectors. He presented a "Typology of Leadership" that uniquely describes the way in which these different roles contribute to and influence organizations in achieving their vision, mission and goals. Finally, Mr. Schaeffer applied his observations on leadership to the implementation challenges of the Affordable Care Act.

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http://calpact.org/index.php/en/events/innovative-speaker-series

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  • 1. The David Brower Center 2150 Allston Way Berkeley, CA 94704 Leadership and Management: Implications for the Future of Health Care Reform Leonard D. Schaeffer Judge Robert Maclay Widney Chair and Professor, University of Southern California March 17, 2014 Innovative Leaders Speaker Series Sponsored by CALPACT and UC Berkeley Center for Health Leadership
  • 2. 2 LDS 2014 All Rights Reserved Agenda Leadership vs. Management §  Introduction §  Institutional Response to Change §  A Typology of Leadership §  Implications for Future Health Reform §  Conclusion
  • 3. Government Not-for- Profit Academic •  HCFA Administrator, HHS •  Asst. Sec. Management and Budget, HHS •  Director, Illinois Bureau of the Budget •  Deputy Director, Illinois Dept. of Mental Health For-Profit Introduction •  CEO, Blue Cross of California •  CEO, Group Health of Minnesota •  Chairman & CEO, WellPoint •  COO, Sallie Mae •  VP, Citibank •  Schaeffer Center For Health Policy & Economics •  Harvard Medical School Board of Fellows •  RAND, Brookings, & USC Boards of Trustees •  Institute of Medicine, Member
  • 4. 4 LDS 2014 All Rights Reserved Agenda Leadership vs. Management §  Introduction §  Institutional Response to Change §  A Typology of Leadership §  Implications for Future Health Reform §  Conclusion
  • 5. 5 LDS 2014 All Rights Reserved Institutional Response to Change Large Institutions Resist Change §  Most large labor-intensive organizations institutionalize a preferred way of doing things §  And then they resist any changes to that process §  Most organizations repeat past behavior until they die or are reinvented
  • 6. Institutional Response to Change However, Change is the Only Constant To  survive  and  prosper,  organiza1ons  must   reinvent  themselves  consistent  with  the       changing  environment   Poli1cs   Public     Policy   Science  &   Technology   Demo-­‐   graphics   &  Culture   Economy  
  • 7. 7 LDS 2014 All Rights Reserved Institutional Response to Change Success Over Time Requires Effective Change The future belongs to those organizations where: 1.  Leaders stimulate change that is consistent with – or benefits from – environmental change 2.  Managers implement
  • 8. 8 LDS 2014 All Rights Reserved Institutional Response to Change Organizational Efficiency – A Digression § There are few completely efficient human interactions –  There are some efficient chemical reactions –  But, all human systems are inefficient § The larger the organization, the more inefficient (and more insensitive to external changes) it becomes
  • 9. 9 LDS 2014 All Rights Reserved Agenda Leadership vs. Management §  Introduction §  Institutional Response to Change §  A Typology of Leadership §  Implications for Future Health Reform §  Conclusion
  • 10. 10 LDS 2014 All Rights Reserved A Typology of Leadership Individual Contributors Conceptualizers Analysts Administrators Managers Leaders Symbolic Leaders
  • 11. A Typology of Leadership Individual Contributors §  Do their own work –  Most people in most organizations §  Professionals are a particular subset –  E.g., Lawyers, physicians, professors trained to focus on a transaction between themselves and client/patient/class §  Identify with their profession, not the organization §  Accountable to "professional standards" (self defined); not responsible for organizational results §  Attempts to improve organizational effectiveness/ efficiency seen as interference in the transaction and therefore reduces “quality”
  • 12. 12 LDS 2014 All Rights Reserved A Typology of Leadership Conceptualizers §  Generate or communicate ideas that influence the behavior of others Analysts §  Evaluate pros/cons of alternative courses of action and recommend which course to pursue
  • 13. 13 LDS 2014 All Rights Reserved §  Provide “oversight” i.e., watch others do work §  Stove top model A Typology of Leadership Administrators LDS 2012 All Rights Reserved
  • 14. 14 LDS 2014 All Rights Reserved A Typology of Leadership Managers § Effective managers change the physical reality of how the organization operates to achieve pre-established goals § Managers develop specific strategies to achieve goals and monitor the process of implementing them through plans and budgets § The organization operates consistent with the values displayed in managers’ behaviors
  • 15. §  Med schools seek to produce “thought leaders”, not organization leaders or managers §  Through research or experience, develop new insights or therapeutic approaches that are described in papers or shared at professional meetings §  When other similar professionals adopt those insights or approaches, the initiator is considered a thought leader §  Impact seen throughout profession, not just one organization A Digression ―Thought Leaders
  • 16. 16 LDS 2014 All Rights Reserved A Typology of Leadership Leaders § Leaders have a vision of the future that is so compelling and communicated so persuasively that others take action to achieve this vision § Leaders: –  Articulate their vision of the future –  Define the mission of their organization –  Establish clear, time-specific, quantifiable goals –  Inspire others to achieve their goals
  • 17. 17 LDS 2014 All Rights Reserved A Typology of Leadership Leaders, continued § Successful leaders carefully communicate their vision and provide specific guidance as to who is responsible for achieving specific goals – They tell people what they are supposed to achieve but usually let them figure out how to do it – They explain their organization to the world and the world to their organization1 § “Hands on” leadership is management § Leaders are necessary when it’s too big to manage 1See The Wall Street Journal, How to Fail in Business, January 11, 2013
  • 18. 18 LDS 2014 All Rights Reserved “We  choose  to  go  to  the  moon…   because  that  goal  will  serve  to   organize  and  measure  the  best  of   our  energies  and  skills,  because     that  challenge  is  one  that  we  are   willing  to  accept,  one  we  are   unwilling  to  postpone,  and  one   which  we  intend  to  win…  ”   September  12,  1962,  Rice  University  (Houston)   John F. Kennedy Leader:
  • 19. 19 LDS 2014 All Rights Reserved A Typology of Leadership Symbolic Leaders § Symbolic leaders inspire and motivate others to act not by giving specific orders, but by embodying certain traits or calling for a desired state § Symbolic leaders are necessary when the challenge seems overwhelming or the solution is too complicated to articulate
  • 20. 20 LDS 2014 All Rights Reserved “This  is  preeminently  the  1me     to  speak  the  truth…  This  great   Na1on  will  endure  as  it  has   endured,  will  revive  and  will   prosper.  So,  first  of  all,  let  me   assert…  the  only  thing  we  have       to  fear  is  fear  itself…  ”   March  4,  1933,  First  Inaugural  Address   Franklin Delano Roosevelt Symbolic Leader:
  • 21. 21 LDS 2014 All Rights Reserved “We  shall  not  flag  or  fail...   We  shall  fight  on  the   beaches,  we  shall  fight  on   the  landing  grounds,  we   shall  fight  in  the  fields  and   in  the  streets,  we  shall   fight  in  the  hills;  we  shall   never  surrender…  ”   June  4,  1940,  speech  delivered  to  the  House  of  Commons     of  the  Parliament  of  the  United  Kingdom   Winston Churchill Symbolic Leader:
  • 22. 22 LDS 2014 All Rights Reserved “I  intend  to  set  up  a  thousand-­‐year  Reich  and   anyone  who  supports    me  in  this  bale  is  a   fellow-­‐fighter  for  a  unique  spiritual  —  I  would       say  divine  —  crea1on…  ”   Adolph Hitler Quoted  by  Richard  Brei1ng  in  Secret  Conversa1ons  with  Hitler:     The  Two  Newly-­‐Discovered  1931  Interviews,  p.  68  (1971)   Leadership is Substance-Free
  • 23. 23 LDS 2014 All Rights Reserved Agenda Leadership vs. Management §  Introduction §  Institutional Response to Change §  A Typology of Leadership §  Implications for Future Health Reform §  Conclusion
  • 24. 24 LDS 2014 All Rights Reserved Implications for Future Health Reform §  The Problem of Health Care Costs §  ACA: What’s Supposed to Happen §  New Leadership Requirements §  Conclusion
  • 25. 25 LDS 2014 All Rights Reserved The Problem of Health Care Costs What We Believed §  U.S. = Highest Quality §  ∴ High Cost O.K. §  Limited Access = Market Economy What We Know §  U.S. = Uneven Quality §  = Highest Cost By Far §  High Cost + Bad Economy = Access AccessCost Quality Trade- offs
  • 26. 26 LDS 2014 All Rights Reserved Total U.S. Health Expenditure as % of GDP (Public & Private) Source: Data from the Centers for Medicare and Medicaid Services, National Health Expenditures, January 2012; and the Congressional Budget Office, The 2013 Long-Term Budget Outlook, September 2013. Compiled by PGPF. NOTE: CMS data used for years 1960-2020. The 2038 figure reflects the latest projection from CBO. Long-Term: Rising Health Care Costs Significant Threat To Economy Actual Projected Percentage of GDP
  • 27. 27 LDS 2014 All Rights Reserved Federal Health Spending Drives Deficit Source: CBO, The Budget and Economic Outlook: 2014 to 2024 Source for 2038: CBO, The 2013 Long-term Budget Outlook, Baseline Assumptions, September 2013; Major Health Programs includes: Medicare, Medicaid, CHIP and exchange subsidies
  • 28. Consequences of Mounting Federal Debt §  Crowding Out Investment Lower Output & Income –  A growing portion of people’s savings would be diverted to purchase gov’t debt rather than toward investment in productive capital goods §  Higher Interest Payments Higher Taxes & Lower Output & Income –  Gov’t may be forced to raise marginal tax rates and/or reduce spending on other programs to meet interest payments Sources: Congressional Budget Office, Federal Debt and the Risk of a Fiscal Crisis, July, 2010; USA, Inc., Consequences of Inaction, February, 2011 §  Reduced Ability to Borrow Less Policy Flexibility –  During economic downturns or international crises, gov’t may not be able to raise substantially more debt §  Increased Chance of Sudden Fiscal Crisis –  Investors may lose confidence in gov’t’s ability to repay debt & interest without causing inflation
  • 29. 29 LDS 2014 All Rights Reserved –  OOP premium payment ↑ after 2018 to slow subsidy growth –  “Cadillac” tax on $$ plans effective 2018 & indexed to CPI in 2020 ü  Critical policy changes implemented –  IPAB able to achieve “GDP + 1%” ü  Federal & state regulators successfully implement HIXs, optional Medicaid exp. ü  Medicare ACOs & demos successful & expanded rapidly ü  Individuals & small biz get affordable insurance Complex Implementation: Everything Must Go Right ACA: What’s Supposed to Happen Per Legislation
  • 30. 30 LDS 2014 All Rights Reserved Reform Will Unfold Incrementally 2010 / 2011 2014 § Insurance Reform / Some Expansion Begins Ø  Children / high risk Ø  Preventive care coverage Ø  MLR requirements 2012 Ø  Individual Mandate Ø  Employer Mandate (delayed) Ø  State / Fed insurance exchanges Ø  Insurance Subsidies Ø  Optional Medicaid expansion References: Kaiser Family Foundation , Focus on Health Reform, March 31, 2010; Commonwealth Fund, Timeline for Health Care Reform Implementation, April 1, 2010; Supplement to Columbia Journalism Review, May/June 2010 § Major Coverage Expansion Begins §  Begin Closing Medicare “donut hole” § Patient-Centered Outcomes Research Institute (PCORI) §  Hospital Value Purchasing Program §  $11 billion for community clinics § Independent Medicare Payment Advisory Board (IPAB) § New Insurance Market Rules § CMS Innovation Ctr tests new payment methods
  • 31. 31 LDS 2014 All Rights Reserved Reform Financed by Taxes, Fees & Medicare Cuts §  Medicare FFS rates reduced §  Medicare Advantage rates §  M & M DSH payments 2010 2013 2014 2015- 2017 2018 §  Medicare tax rate §  Medicare tax on investment income §  Employer Part D Rx coverage deduction eliminated §  Floor on itemized med. expenses §  New fees on medical device cos. §  New “Cadillac” tax on $$ health plans §  Tanning Tax 20122011 §  Penalty Payments/ Individuals §  Higher HSA penalty for non-qualified expenses §  New fees on pharma (Rx) industry §  New fees on insurance industry New Revenue: $515 B / Fed Health Program Cuts: $716 B Note: Chart represents major taxes, fees and changes in federal health program outlays §  Major Coverage Expansion Begins (14 new tax increases) References for revenue and cuts: CBO, “Estimates for the Insurance Coverage Provisions of the Affordable Care Act Updated for the Recent Supreme Court Decision,” July 2012, and KHN, FAQ: Obama vs. Ryan on Controlling Federal Medicare Spending, Aug. 29, 2012 §  Penalty Payments/ Employers
  • 32. 32 LDS 2014 All Rights Reserved New ModelOld Model ACA & Fiscal Pressures Demand New Models & Accountability for Cost & Quality Payment systems reward volume Limited focus on efficiency and patient - centered care Pay for services rendered; limited alignment with quality Payment systems reward outcomes and population health Lower cost while improving patient experience Pay for safe, evidence- based care; reward quality Providers control demand Benefit design, treatment protocols & transparency to manage demand
  • 33. 33 LDS 2014 All Rights Reserved §  Physicians & institutions optimized own situation; thus suboptimizing the “system” as a whole §  As the physicians’ workbench, hospitals optimized physicians’ convenience, while physicians: –  Performed as “individual contributors” not leaders or managers –  Defended their autonomy and avoided accountability for system effectiveness §  A fragmented, “cottage industry” resulted focused on individual intervention, not population health Different Roles Required in Large Organizations and Systems Old Era: No Accountability for Results
  • 34. 34 LDS 2014 All Rights Reserved New Roles Required to Transform Health Care System & Reduce Costs New Era: Achieving System Goals §  The health care system faces significant risk, regulatory uncertainty, ongoing environmental change, and the demands of new delivery models §  Transformation to a high-value health care system requires: –  Leaders who can establish a vision and motivate others to –  Managers who can implement strategies to achieve those goals –  Analysts who can evaluate and recommend effective tactics achieve goals in large organizations and systems
  • 35. 35 LDS 2014 All Rights Reserved § Delivery of health care moving to large organizations and health systems designed to be accountable for results § Payment methods also shifting from volume to value-based care that require performance measurement and reporting § To succeed in this new health economy, participants must adopt new roles as leaders, managers, and analysts As stakeholders and as citizens, we must significantly transform the American health care system Conclusion
  • 36. 36 LDS 2014 All Rights Reserved Shape the Future 36 LDS 2012 All Rights Reserved
  • 37. 37 LDS 2014 All Rights Reserved Who Should Lead / Manage Delivery of Care? §  Primary Care Physicians §  IPAs §  PMOs §  ACOs (Accountable Care Organizations) §  Specialty Societies §  Peer Review Organizations
  • 38. 38 LDS 2014 All Rights Reserved Who Should Lead / Manage The Health Care System? §  Government Body –  HHS / CMS / FDA –  State-level regulators –  Independent Payment Advisory Board (Medicare IPAB) –  “Federal Reserve” H.C. Board §  Health Insurance Exchanges §  Health Insurance Companies §  Hospital-Physician Networks §  “The Market”