spea magazine

Just Curious: Q&A

David Handel Knows Healthcare

The former COO of Clarian now directs SPEA's health administration program. He shares his thoughts on trends in the field.

More and more physicians are starting their own specialty hospitals. You’ve obviously seen it happen in Indianapolis. What can community hospitals do to survive this new trend?
I wouldn’t call it a new trend—more like an extension of a trend that started several years ago. Physicians are facing the challenge of declining reimbursement. They’ve been looking for additional services they can provide in their offices and through new venues to maintain their income levels. We saw it as one factor in the creation of ambulatory surgery centers and diagnostic centers. Now we’re seeing it again as one factor in the development of specialty hospitals.

Hospitals can respond by operating as efficiently possible. And they need to provide new services, bariatric surgery, for instance. And many hospitals are expanding their services in areas like cancer, heart disease, and in women’s services.

Some people predict that community hospitals will eventually become giant intensive care units, serving only the sickest.
I don’t think so. Clearly, we’ve got an aging population. The acuity of patients will go up and so will the utilization of intensive care services. It’s also going to lead to an increase in other inpatient and outpatient services. The proportionate increase in intensive care services will probably be at a greater rate than the increase in medical/surgical usage. But the idea that hospitals will become giant intensive care units—that’s an overstatement.

What other challenges face hospitals today?
First, just having capacity to provide needed care. One of the assumptions prevalent years ago was that the amount of inpatient care would decrease and there would be the need for far fewer hospital beds and hospitals. Now health care is reaching a point where inpatient care will probably increase and hospitals will have to expand their capacity in the number of medical/surgical beds and in intensive care.

Another challenge: the level of reimbursement hospitals receive. For a typical hospital, over 50% of their patients are covered by the government-funded Medicare and Medicaid programs. That percentage is increasing for many hospitals. If you look at the short term, all the government-funded programs will be challenged from a financial standpoint because of large deficits at both the federal and state levels. If you assume that hospitals won’t get an increase from Medicare and Medicaid consistent with increases on the cost side, that’s a significant and potentially immediate challenge.

Looking long term, funding of Medicare is a big issue. The working population funds a significant percentage of the costs of the Medicare program, including the costs of those currently in the program. As the population ages, there will be proportionately less people working relative to those covered by Medicare.

There are a variety of other challenges. One continuing issue is labor shortages in key areas such as nursing. Another is availability of capital. This will be an increasing problem as hospital finances are challenged.

How do you think government will respond?
The two potential sources of revenue for Medicare are payroll taxes and retirees’ co-pays and deductibles. While this will be a very difficult political issue, it’s likely that both will have to increase to meet the rising costs of the Medicare program.

Let’s get back to the cyclical phenomenon of a nursing shortage. What has to happen in order for hospitals to recruit more nurses, along with radiology and medical technologists?
The nursing shortage will be with us for awhile. The average age of hospital nurses has been going up for many years; they’re now, on average, in their mid-forties.

As these nurses retire, hospitals will have to recruit large numbers of nurses to replace them, and to do that, nursing needs to be attractive to potential students.

But at the same time, there’s another immediate challenge. There aren’t enough nursing faculty to allow a significant expansion in nursing enrollment. You need a focused effort to expand the numbers of qualified faculty.

Applications to nursing schools are up. It’s a case of supply and demand; salaries increase when you have a shortage of staff. So, financially, a career in nursing is more attractive now. It’s also a stable profession, which is attractive in an unstable economy. We’re seeing similar trends in radiology and medical technologists.

What hospitals need to do is focus on retention and recruitment. I say that very intentionally in that order. They need to make the hospital a satisfying place to work so they can retain the staff they have. It all starts with keeping the people you have by creating the best work environment possible and providing benefits like educational support and flexible work schedules. At the same time, you need a proactive, effective recruitment program.

It’s so hard for people to be informed consumers when it comes to health care. You can easily find reliability information on almost every product—used cars, for instance—but it’s very hard to know if your hospital is a good one. How can hospitals convey that they deserve the public’s trust?
In the coming years we’re going to see a lot more emphasis on the quality of health care. We’re going to see data that reflect how providers are doing in terms of quality.

That kind of data collection has started but it needs to be more developed and refined. Many different groups are doing this, including Medicare, the Leapfrog initiative, Health Grades, and insurers like Anthem.

From a health care provider standpoint, it would be beneficial to have consensus on the indicators to be measured. It’s still early in this process and I expect the data to get a lot better over the next several years.

Do you see nationalized health care happening in our lifetime?
At this point, no. The U.S. has such a long tradition of private health care that people are generally comfortable with this kind of system.

The more immediate question is, what will happen to the 40 million-plus people who are uninsured? Will there be significant efforts to find ways of reducing that number? In that process, how will it be funded and what will be the insurance mechanism to provide that coverage? Some of these are political as well as practical questions.

Do you think things will change if we get a new man in the White House?
That’s hard to predict. One has to remember that the Clinton administration spent a huge amount of time focusing on health care and, in the end, there was no progress or major changes. It’s a very complex issue and potentially a very expensive one. A lot of people portrayed the Clinton initiative as a move toward national health insurance and that was viewed negatively by many. The fact that Clinton’s program made no progress demonstrates just how complex the health care field is. The very large federal deficit also will make it difficult to fund expensive new initiatives.

Considering all the stress involved, why would someone want to pursue a career in hospital administration?
Look at the health care field in general. You’re in the business of really helping people and that’s very satisfying. Hospitals and health care administrators can have a very positive impact on the patients served as well as their communities. I think that’s one of the biggest attractions of health care. Hospitals are clearly among the most complex organizations around. But you have an opportunity to make a difference in a complex environment—that’s also attractive to many people.

Career opportunities for those with Masters of Health Administration degrees used to be limited mostly to hospitals. What are job options today?
They are very diverse. Clearly, there are still significant opportunities in hospitals. There are also a lot of opportunities in ambulatory care and physician practice management, health maintenance organizations, health insurance, health care companies, and consulting.

This is a huge transition for you, going from COO of Clarian to director of the health administration program at SPEA. Why are you doing it?
Health care is one of the largest and most important economic sectors in the state. It’s seen as a major area for potential economic growth as exemplified by the Biocrossroads initiative. For long-term success, we need strong health care leaders. I expect SPEA and the MHA program will play a major role in helping achieve this.

This position is a new and different type of opportunity for me. I like the fact that I can have a positive impact on the education and career development of these future health care executives. I also think it will be fun.