The U.S. health care landscape is changing in a way that’s reminiscent of shifts that occurred during the Clinton Administration. As a former hospital CEO who experienced first-hand that earlier land rush, I’m struck by the similar dynamics that are at work again in health care.

To be sure, there are great differences between the two periods: at the core, the Obama health care plan was enacted; the Clinton plan was not. Yet the Clinton plan still had significant impact. As one hospital CEO at the time recalled recently,

Most of us believed that the method of payment would shift immediately to capitation and that we needed to control the revenue stream by buying physician practices. It was a disaster: we agreed to ‘capitated’ contracts that were way under-priced, and we over-paid for practices that immediately lost productivity. Patients were lost and alienated in a complex system of gatekeepers and referral authorizations. To this day, policymakers are loath to use terms like ‘capitation’ or ‘lock-in’ and instead speak of ‘attribution’.

The similarities between the two periods, however, are profound: both plans put health care at the top of the domestic policy agenda and captivated public attention; both led to dramatic mid-term election losses by the President’s party and to Republican majorities in the U.S. House of Representatives (and the U.S. Senate in 1994), and both altered the health care landscape. Stanford University economist Victor Fuchs described the Clinton initiative at the time as “encouraging the formation of integrated health care plans that will have responsibility for defined populations.” Interestingly, that quote aptly describes where we are today – only this time we are talking about the creation of accountable care organizations (ACOs) and medical homes.

My concern now is that health care administrators will do the same thing we did last time: attempt to buy up everything, spend our energy on developing new structures, and never get to the real issue, which is building the capability to improve health and increase the value of health care. We took our eyes off the ball: instead of focusing on patients, we focused on expanding our reach.

To center our attention on advancing the health of the population and improving the delivery of health care, the proposed rules for ACOs that have just been issued by the Centers for Medicare and Medicaid Services are heavily anchored in care coordination, safety, and patient-centeredness. As a result, I offer the following considerations to my colleagues at leading hospitals and health care organizations:

  • Will acquisitions and consolidations improve care? It’s tempting to think that you can deal your way to success, but improvement rather than growth is the key. Consider hospital readmissions, for example. One in five hospitalized Medicare patients is readmitted within 30 days of being initially discharged, according to the New England Journal of Medicine. The vast majority of those readmissions could have been avoided, according to the Medicare Payment Advisory Commission, and those avoidable readmissions cost Medicare a staggering $12 billion in 2005 alone. As a result, in October 2012 the federal government will begin penalizing hospitals if they have higher-than-expected rates of readmission for certain conditions. In the end, it won’t matter how big an organization is; if its care isn’t up to appropriate standards, it will suffer. Owning volume is no longer good enough. Learning how to improve care for patients according to the six aims of the Institute of Medicine is far more important.
  • Do hospital administrators know their improvement capacity and how to enhance it? Increased transparency is an extraordinary new commodity, and it will drive improvement by making comparisons readily available. Some comparisons are already online: the U.S. Department of Health & Human Services’ survey of patients’ hospital experiences is a great example. Greater transparency will force hospitals to enhance their improvement capacity, as employers, health plans, physicians, and patients, increasingly make choices based on this data.
  • Do administrators know the current level of engagement and alignment among their clinical and administrative staff and know how to improve that as well? The CEO of a major highly acclaimed hospital said recently that 2011 would be the first year in which he would have no growth measures in Board-approved annual goals. Expectations of physical or financial growth have been replaced by improvement goals. In that context, the role of the CEO has changed dramatically: rather than being held primarily responsible for the finances and the physical plant, CEOs are now being judged on health care outcomes. That requires closer alignment among clinical and administrative staff and a strategy to ensure greater collaboration. The best care is provided by teams in an environment of service and support, with the CEO setting the culture of the organization, so that staff excel on behalf of the patients and families they serve.
  • Do hospital administrators know their population health? Increasingly, population health will be key both to health care providers and to the nation’s economy. Per capita health care costs will be especially crucial to health care providers, and the trends are not encouraging. The rate of diabetes in the United States, for example, has nearly doubled in the last 10 years, according to the Centers for Disease Control and Prevention, and now costs the nation more than $174 billion annually, according to the American Diabetes Association. It is likely only to increase, given the growth in obesity. Improving population health will become a preoccupation of hospital administrators as well as  elected leaders who are on the hook to balance public budgets. It will also create the need for collaborative relationships with several different types of social agencies in the community.

In many ways, the role of hospital administrators will be more important and challenging than ever. They will become responsible not just for their facilities but for the health of the people they serve. Knowing the right questions to ask, building trusting relationships, and focusing on the patient and the health of the community, will all be crucial.