Mindful over mindless: learning to think like an entrepreneur. (Innovation).

YOU LIVED THROUGH diagnosis-related groups and resource-based relative value systems. You watched the longterm decline of your inpatient base. You witnessed the rise and fall of health care giants like Columbia and PhyCor. You made and abandoned commitments to management tools like total quality management, continuous quality improvement and re-engineering.

So what's next?

Brace yourself. Much greater changes are on the horizon.

Costs are rising again. Purchasers are more discriminating. Quality is no longer accepted as a given. And bad service is increasingly not tolerated.

Customers have greater access to information. Complementary medicine continues to expand. Pressures are mounting for improved, documented, high-quality, cost-effective access to services. Customers want it all.

Hospitals and physicians are no longer among the most trusted members of our society. Patients are frustrated with a lack of personal contact with providers. The number of uninsured continues to expand. And results from genetic, pharmaceutical and technological research suggest an uncertain future.

Are these expectations and pressures reasonable?

Some are and some aren't, but they do exist.

Things are not like they used to be and there's no end in sight. The future looks bleak or the future looks like a time of unsurpassed opportunity. It depends upon your perspective. Are you a traditional health care leader or an opportunistic entrepreneur?

Faced with the same environmental circumstances, some leaders see threat while others see opportunity.

For example, during the late 1980s and early 1990s traditional mainframe and minicomputer makers logged $20 billion in operating losses. (1) None of these companies was able to adapt effectively to the personal computer world. Instead they tightened the thumbscrews on existing processes, attacked costs through mergers and layoffs, and withered away.

Personal computer innovators such as Intel, Sun, Microsoft and Dell created extraordinary value during the same time.

The airline industry provides another dramatic example.

After the 9/11 tragedy, Southwest Airlines continued to fly its full schedule and reported positive quarterly profits. Other major airlines resorted to major cutbacks and posted major losses.

What leads to these vast differences in behaviors and outcomes under highly similar circumstances? Clearly, in each of these cases, leaders within the same industry held different assumptions, perceived different possibilities and took actions that led to vastly different outcomes.

Tough decisions

As a senior decision maker at your hospital, you are faced with many challenges.

Housing prices in your community have tripled. The people who supported your community hospital for 80 years are moving on as factories in your area are closing. Newcomers moving into your community seem willing to drive 10 or even 30 miles to receive care from one of your multiple competitors.

Surveys of local residents suggest that many respondents believe your medical staff is lacking, your facilities are shabby and your parking is inadequate.

As your census numbers, revenues and limited reserves continue to drop, you are faced with the need to make some major choices. (2)

As a physician leader, what will you do to address these challenges?

Answers to such questions in health care during recent decades included selling/merging your hospital or attempting to shrink your way to success by closing services/facilities. However, research shows the futility of downsizing as a path to success. (3) And merger mania has proven as unsuccessful in health care as other industries. (4)

Following the health care herd clearly doesn't lead to the desired outcomes. But what other alternatives exist?

At Griffin Hospital in Connecticut where they wrestled with the situation described above, leaders assessed the community's need and desire for distinctive maternity services, redesigned their offerings to meet those needs and made the investment necessary to reap the positive benefits from their experiment.

Building on the success of this first venture, they then moved on to additional service areas. Results from this ongoing series of experiments include financial success combined with regular recognition as one of Fortune magazine's top places to work in the United States. (5)

By what process did these leaders make such distinctive entrepreneurial choices? How might you, as a physician leader, follow a similar path to long-term success for your organization? Where will you search for the new answers to address the challenges facing your health care organization?

Working harder at doing what you've already done the way you've already done it seems unlikely to effectively address these issues.

Entrepreneurial thinking

Successful entrepreneurs are people who create something of value from practically nothing.

They are people who sense opportunities, marshal resources, take calculated risks and push ideas through to reality. Typically driven by a commitment to a common vision and bold goals, they reward results and have little tolerance for those who worship process and effort. (6)

They may do this in small startups or by initiating a new and different means of generating value within large organizations.

But why would you be interested?

Entrepreneurs contributed significantly to the growth of the U.S. economy. For example, entrepreneurs created over 90 percent of the wealth in America since 198. (7) As Fortune 500 companies lost millions of jobs during the 1980s and 1990s, entrepreneurs in the United States created jobs that fueled the economic expansion.

As recently as 1980, Fortune 500 firms employed 1 in 5 members of the workforce. Yet by the late 1990s, the number was just 1 in 14. Not only do entrepreneurs create jobs for others, they create significant wealth for themselves. For example, 72 percent of the 400 richest Americans in 1997 acquired their wealth as first generation entrepreneurs. (7)

Why else might entrepreneur-ship be interesting to you as a physician leader?

The answers go well beyond money. Entrepreneurs report the highest level of professional satisfaction and pride in our society. (7)

Independence, adventure, fun and the opportunity to implement new ideas draw them to do what they do.

To the degree that you wish to attract these individuals, experience these emotional rewards and generate these economic outcomes for yourself, your organizations and your communities, opening doors to organizational success through entrepreneurial thinking may provide you with a valuable path to the future.

Entrepreneurs are clearly interested in health care. Spending more than one trillion dollars annually, health care represents a huge and growing market opportunity.

In addition, entrepreneurs are drawn to change. While people who are invested in maintaining the old health care environment may perceive change as a source of stress, frustration, confusion and fear, entrepreneurs see the disruptions as opening doors to new competitive opportunities.

Seeing opportunity where others see threat requires moving beyond common wisdom. Successful entrepreneurial behaviors flow from making distinctions, sensing opportunities and pursuing results in market niches that have not yet been overrun by the herd. (6)

Mindless vs. mindful choices

Popular health care strategies during the past decade included the medical arms race, TQM/CQI, re-engineering and mergers/acquisitions.

While some succeeded, the majority of organizations that pursued the fads failed to reach intended Outcomes on time and within budget. Current fads include a movement back to basics, investing in technology and six sigma quality programs.

Each represents a type of herd behavior--the widespread adoption of an innovation with unproven benefits, be it an idea, technique, technology or product.

Lee Kaiser, an eminent health care futurist, says health care providers are "me too" folks. They wait for someone else to do something first and then they rush to copy it.

These behaviors are not hard to understand. Following the herd requires less of the hard work associated with thoughtful leadership. In the words of Bertram Russell, "most people would rather die than think."

Mindlessly looking into the environment when selecting strategies also minimizes personal risk by providing a ready justification for less-than-successful leadership choices. Mindfully clarifying your organization' s internal capabilities as well as environmental opportunities provides an alternative avenue to entrepreneurial success.

Mindfulness is a state of alertness or lively awareness associated with highly reliable, effective performance across diverse settings, including health care organizations, nuclear power plants and air traffic control systems. (8)

Mindful thinking is reflected in three mutually supportive, highly interrelated sets of organizational processes:

* Creation of new categories that expand alternatives

* Openness to new information

* Awareness of multiple perspectives (9)

These are evident in leading organizations, including Griffin Hospital. Griffin leaders faced red ink, declining revenues, a lack of support from patients and limited resources. Common wisdom suggests that cutting costs should lead to better bottom-line performance.

Thinking out of the box

Paradoxically, a recent survey of America's best performing medical practices shows average operating costs 8 percent higher than those of other multispecialty groups.

Rather than restricting margins, these higher operating costs-invested in employing the right people, placing them in the right positions, and supporting them effectively- resulted in medical revenues per full-time equivalent physician that were 27 percent better than other medical groups. (10)

Thinking out of the box, Griffin Hospital leaders followed a similar path of identifying and investing in new possibilities like their maternity services that expanded their alternatives beyond selling or shrinking.

This required the reexamination of generally held truths and an unwillingness to simplify interpretations.

For example, just because General Electric is successful in merging organizations does not mean your health care system has similar management capabilities. Also, just because others believe something can't be done does not mean your organization can't do it. Southwest Airlines successfully built its initial organization in Texas even though the competitive environment suggested the venture was likely to fail. Its distinctive internal leadership capabilities allowed it to create a business model and take advantage of the environmental opportunity for low fares previously overlooked by others in the marketplace.

Starting small and trying lots of things such as close-in airports, no travel agents and ticketless reservations allowed Southwest to operate differently from its competitors.

Rather than acting on automatic pilot and following the herd, entrepreneurial leaders at Griffin Hospital similarly demonstrated openness to new information from surveys that suggested changing needs.

Openness is supported by commitment to recovery and renewal through experimentation. Such experimentation is unlikely if your organization is punishing employees for errors rather than rewarding those who come forward with useful information about things that are not working.

Finally, leaders at Griffin Hospital demonstrated an awareness of multiple perspectives rather than relying on their traditional ways of seeing things. Realism expressed as a preoccupation with both failure and success is fundamental to successfully supporting this openness to diverse possibilities.

In the early days, Southwest knew it couldn't keep its promised schedule with only three aircraft if it couldn't complete a 10-minute airport turnaround. Others in the industry didn't think it could be done, but the people of Southwest did it anyway because the facts demanded it.

Confronting reality as it is, not as you would like it to be, starts with leaders asking questions, not providing answers. It is supported by engaging in dialogue and debate, not coercion. And it is accomplished by conducting autopsies without blame in order to find out how best to improve operations. (11)

A focus on either success or failure alone may not be sufficient for enduring success. A single-minded focus on failure is likely to drive a firm into the ground as quickly as a singular focus on success. Enduring effectiveness may instead require a paradoxical focus on both success and failure.

Successful entrepreneurial thinking flows from a foundation built on making mindful distinctions. Re-examining the current wisdom, recovering through experimentation with new possibilities and realistically examining the implications of strategies for both success and failure support such mindfulness.

Mindful leaders who demonstrate entrepreneurial thinking are an important part of that process in other industries. A limited number of health care organizations are demonstrating the efficacy of following similar patterns. (6)

As a physician leader, this is an excellent time to gain a competitive edge by encouraging mindful entrepreneurship in your health care organization.

Mindfulness

A Path to success

Mindfulness       Entrepreneurial Thinking  Outcomes

* Re-examination  * Sensing Opportunities   * Clinical
* Recovery        * Marshalling Resources   * Financial
* Realism         * Focusing on Results     * Human

References

(1.) Christensen, C, Bohmer, R and Kenagy, J. "Will Disruptive Innovations Cure Health Care?" Harvard Business Review. 2000, September-October, 102-112.

(2.) Freedman, DH. Intensive care. INC., 1999, February, 72-80.

(3.) Cascio, WF, Morris, J, and Young, C. "Downsizing After All These Years: Questions and Answers About Who Did It, How Many Did It, and Who Benefited From It." Organizational Dynamics. 1999, Winter, 78-87.

(4.) Colon, G, Gupta, A and Mango, P. "M & A Malpractice." McKinsey Quarterly. 1999, 1, 62-74.; Hitt, MA, Ireland, D, Camp, SM and Sexton, DL "Strategic Entrepreneurship: Entrepreneurial Strategies For Wealth Creation," Strategic Management Journal. 2001, 22, 479-491.

(5.) Levering, R and Moskowitz, M. "The 100 Best companies To Work For." Fortune. 2001, January 22, 148-168.

(6.) O'Connor, E J and Fiol, CM. Entrepreneurtal Thinking in Health Care: Creating the Focus for Future Success. Tam pa, Fla., American college of Physician Executives, 2002.

(7.) Timmons, JA. New Venture Creation: Entrepreneurship for the 21st Century. Chicago, Irwin Press, 1999.

(8.) Fiol, CM and O'Connor, E J In press. "Waking Up! Mindfulness In the Face of Bandwagons." Academy of Management Review.

(9.) Weick, KE, Sutcliffe, KM and Obstfeld, D. "Organizing for High Reliability: Processes of Collective Mindfulness." In Sutton, RI and Staw, BM (eds.) Research in organizational Behavior. Stamford, Conn., JAI Press. 1999, 81-123. Langer, EJ. "Minding Matters: The consequences of Mindlessness-Mindfulness." In Berkowitz, L (ed.), Advances in Experimental Social Psychology, San Diego: Academic Press. 1989, 22, 137-173.

(10.) Romano, M. "Spend Money to Make Money." Modern Healthcare, January 21, 2002, 26.

(11.) Collins, J. Good To Great: Why Some Companies Make The Leap And Others Don't. New York, HarperBusiness, 2001.

RELATED ARTICLE: Important New Steps for Physician Execs: Build Political Ties, Increase Community Influence

By Martin Hickey, MD, MS, CPE, FACPE 

The proportion of annual health care revenue in the United States that originates with government payers is pushing 50 percent. Medicaid Medicare, VA and other federal programs such as Federal Employees Health Benefits Program are moving federal and state governments to become the dominant drivers of health care revenue.

When state and local governments, that fund state, county and city employee health care benefits as well as those of teachers and state university staff, are included, the proportion of health care revenue that evolves out of a tax base and political process significantly increases. In New Mexico, this approaches 75 percent.

As physician executives we tend to focus our attention and efforts on the tap--health plan reimbursement. However, we should be focused on the reservoir--the political process at the local, state and national levels.

In contrast to the heady days of managed care with annual health care cost increases held to a minimum, the nation is now experiencing an annual medical cost trend approaching 15 percent.

Reasons for the rising costs include.

* Aging baby boomers 

* New and expensive drugs

* Labor shortage of nurses, technicians and specialists

* Growing regulation and compliance policing (such as HIPAA)

There is no new managed care to control these costs especially demographics and labor shortages. The only answer for the foreseeable future is revenue enhancement.

But if there is no reservoir of money to fund it the ability to provide appropriate health care will be at risk. The major supplier of that reservoir will be political, and physician executives must come to understand and become involved in how the process works.

But engaging in the political process alone is insufficient Physician executives must develop allies and credibility with community and business leaders, as well.

If Medicare Medicaid and state funded employees do not have enough of the tax base allocated to fund health care benefits, then insurers and providers will cost shift to business and commercial payers to cover rising costs and the inadequate reimbursement of government payers.

So the natural allies of the physician executive are the local business leaders.

Simply going to the state capitol or your congressional delegation to insist on more physician and hospital reimbursement for medicare and Medicaid is likely going to lead to the age-old problem of physician self promotion something for which there is little political or community sympathy.

Rather physician executives need to teach community leaders why health care costs are going up how cost shifting to the private sector occurs when the government inadequate funds health care and how community health can deteriorate without adequate overall revenue.

Also with the impending problem of specialty scarcity, community leaders need to know than physicians will leave under-funded communities for those that can provide adequate compensation.

So physician executive must now become experts in community influence and political affairs . This will take time so immediate impacts on revenue may not be seen.

But in the long run , the failure to help understand and help control government based health care revenue can lead to extremely serious consequences for the physician executive's organization and the community that it serves.

Martin Hickey, MD is the CEO of Lovelace Health Systems in Albuquerque, N.M.

ACPE Resources

For more details on how to learn and practice community and political influence consider taking the ACRE course. "Leading Beyond the Bottom Line" Call 800/562-8088 or visit www.acpe.org for more information.

C. Marlene Fiol, PhD, is an associate professor at the University of Colorado-Denver. She can be reached by calling 303/556-5812 or by e-mail at [e-mail].

Edward J. O'Connor, PhD is a principal with the Implementation Instiutte, a professor of management at the University of Colorado at Denver, a courtesy professor of management at the University of Oregon and a member of the faculty for the American College of Physician Executives and the Kaiser Consulting Network. He can be reached by calling 303/573-1273 or by e-mail at [e-mail].