The Healthcare CEO Podcast with Special Guest Bill Hercules

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Welcome to the Healthcare CEO podcast. Join us as Daniel Fernandez, healthcare leader and patient experience advocate, leads dynamic one-on-one discussions with healthcare executives, consultants, and other industry experts. Listen in as they share actionable insights and unique perspectives in the day in the life of a healthcare CEO.

*The following has been adapted from our full-length interview, which can be found here.

Meet Bill Hercules

Bill is the founder of WJH Health. He’s planned or executed 9.7 billion dollars worth of work for some of the largest organizations in the country — some of which include Baycare, Advent Health, Johns Hopkins, and Nemours. He’s also an accomplished architect, community leader, contributing author, and public speaker.

About WJH Health

WJH Health is a global consultancy which resolves the nexus of mission, health, performance, and experience for future-oriented healthcare facilities.

Creating Healthcare Spaces in Disruptive Times

Bill Hercules (BH): We’re in a very strange point in time right now where everybody is very confused. They’re wondering, how do we get back to normal, because there’s safety and security in normal. But there have been a number of things that have been disrupted that actually have a very interesting historical perspective.

About 20-25 years ago, the American Institute of Architects (AIA) Academy of Architecture for Health did a very provocative national conference in Pittsburg, titled, “The Bedless Hospital: Imagine a Hospital Without Any Beds.” This was the mid-late 1990s, and the historical context of that was a collection of things that were happening within the federal space around reimbursement. Capitation was a word that was starting to float around, and nobody really understood how to deal with that. There were some systems — integrated systems on the West Coast, Kaiser, and others — that were essentially doing that as a completely integrated system, but the feds were really trying to dig deep into this. The federal government had a problem balancing its budget, and it made federal reimbursement a little tighter.

At the time, we were pursuing what we thought were pretty good-sized, 20 million dollar projects, significant expansions, and that sort of thing, but those were compressed while the feds were working on all of their initiatives. Fast forward a little bit, and some of those federal initiatives didn’t proceed. The feds ultimately did get their budget balanced, and the pent-up demand associated with those 20 million dollars mushroomed into 100 million dollar projects. So in the early 2000s suddenly there was a building boom in hospitals.

What we didn’t have then that we do now, 20 years later, is the IT infrastructure, the health informatics, the predictive analytics, the artificial intelligence, etc. that simply didn’t exist then. I heard a COO recently say, “You know, it used to take us two years to get an app built. Now we can do it in three weeks.” But when pressed into it by the emergency of what Covid is, a number of things can happen, and the technology exists to make it happen. And it affords us a very interesting lens into what the future might be — a hybrid of physical and virtual places across the entire continuum of clinical and ambulatory care, up to and including critical care. So there are a number of models being explored, but it hasn’t been built yet. So the experimenters are still in their basements tinkering around with things.

Daniel Fernandez (DF): Are there any examples you can think of, of facilities and organizations that are doing it well today?

BH: As I mentioned before, the Kaiser organization really built themselves around a completely integrated model back in the 1940s, and they offered an insurance product which was more than just insurance. It was a completely integrated approach to taking care of one’s health. And they figured out early on that part of the equation was controlling the costs of hospitalization and physician visits. Even now this is a bifurcated system, but Kaiser had developed a fully integrated system. It’s not necessarily a panacea, but it is an integrated system.

If we look back about 10 years ago when the Affordable Care Act was being developed and ultimately ratified by the Obama administration, there were a number of attempts to create a governmental system that was essentially fully integrated, and there were a number of other elements around that attempted various components of this. So what does it mean in terms of the physical places? There are a number of nuances around this, but I think the biggest way forward here is in the difference between the demand for a physical place — which is expensive and inflexible largely — and a very flexible virtual space. And I would argue that you need both of them, even right now. While all of us have iWatches that can do EKGs and the newer ones that can even do a pulse-ox, it doesn’t necessarily replace what a physician can do.

DF: Do you believe that the way healthcare facilities are designed in the future will change? What about administrative spaces?

BH: I had a very interesting discussion with a number of HR people on an ACHE webinar a few weeks ago. They were talking about the stress associated with Covid and how some systems are trying not to lay people off but instead repurpose them— in other words, about the tactics to keep the team together and to keep everybody happy and focused while the house is still on fire. But, as the only architect in the room, I asked the question: What does this mean? And, to a person, they said we are looking at divesting ourselves of the softer administrative space. Any place we don’t need to have, or if we can deploy them in another venue like working from home, we are going to seriously explore that and its benefits.

From a lifestyle perspective, the benefits we’ve seen are significant from a more remote model, but from a team perspective, the jury is still out. They want to get everybody together as a team and remain focused, or otherwise, it winds up being a purely transactional workpiece — a kind of gig economy — that they don’t really want to create, culturally. So, as far as those softer, administrative spaces go, I think the demand is going to significantly shrink.

Healthcare Spaces and the Patient Experience

DF: When it comes to specialized procedures, I’ve been to many facilities where everything’s been crammed together. Do you think maybe there will be a renewed focus on the human experience or a chance to enhance that, moving forward?

BH: A number of systems have been talking about their patient experience for decades now. The Picker Institute and Press-Ganey, for instance, actually measure patient engagement. So they’ve been focusing on this for a while. CMS even has a component of their reimbursement structure tied to the patient experience, so it’s gotten people’s financial attention as well. But it’s really more of an art than a science to understand what that means.

The broader issue is not just if the space should feel like a spa or a home or a hotel. The reality is that you don’t go to a hospital because you want it to feel like home. You go to a hospital because you’ve got an ailment and you’re hoping that they’re going to take care of you. And you want to get out. You don’t go there for vacation, you go there for a specific reason. So, paying attention to those experiential pieces is extremely important. There are some systems who have even engaged the Disney organization, for example, to help. But it becomes a much broader branding issue — What is it we want to say to the community about our system in order to frame an expectation of the outcome, the quality of care, and the follow-up beyond coming into the brick-and-mortar space. And that plays itself out not only in the physical space but also in the virtual space, which is obviously more adaptable.

Innovations, Technology, and the Future of Designing Spaces

BH: I think there’s going to be a very interesting transformation in the space of designing buildings or even why we should have buildings — fundamental questions like that. As an architect, and certainly, if I was with a large firm where our incentive is around having lots of projects to keep our machine moving, these are important questions to ask. Similarly, the business model of hospitals is built around having “heads in the beds” in order to make the margins. There are some fundamental questions like these that CEOs are talking about and asking about right now. Should we even have the same kinds of buildings that we historically have had, and what are the benefits of those assets? These are extremely expensive, and therefore inflexible assets, so it really begs the bigger question of whether the lifespan of these buildings is going to be shorter, and can we adapt these spaces to meet the changing demands.

There are ways of developing and anticipating various approaches to what might happen in these spaces into the future and creating the added adaptability around how this might develop into the future. Software is a lot easier to customize than physical architecture — concrete is still not flexible. But the ability to adjust the operations with a variety of multi-purpose spaces is what I think the future is going to be.

DF: What is the correlation between margin and mission? Obviously, you need to pursue your mission, but also you have to be financially responsible.

BH: If we look at how the healthcare systems are structured across the country, some of them are government systems, some of them are for-profit systems, and some of them are not-for-profit systems. But they all rely on the ability to create some sort of operating margin in order to sustain themselves. And, especially in the not-for-profit space, those margins have been historically thin, so they rely on other financial mechanisms (e.g. investments) in order to keep their mission going. Historically, these operating margins are in the 2-3% range, maybe more if the economy is going really well.

I saw some recent numbers that prognosticate through the end of this year that most hospital systems across the country will lose between 1-10%, so if you’re operating on a very thin margin, you’re taking a pretty significant hit. So what this means in terms of hospitals’ ability to pivot and deploy future capital for any kind of innovation (e.g. IT infrastructure, facilities, capital investments) is going to be significantly hampered. Some of them have accumulated enough of an investment portfolio that — given how the stock market has performed — has buoyed their ability to remain solvent, but they’re stressed right now, and the federal government is still all over the map about how they’re going to reimburse for things like virtual care.

DF: For the healthcare CEO listening today, what are some of the things you’d like them to know about the architectural space?

BH: I think the need for physical space is going to remain. I’m trying to develop a rubric around this to publish in the coming months, but basically, you’ll need a space if:

  • You need dedicated teams that are highly skilled and trained that you can’t otherwise assemble in a virtual way, and they need to be there physically to deal with a physical patient who has a very complex collection of maladies.
  • You have a need for some sort of invasive intervention like a cath procedure or a surgical procedure where the environment of care has to be extremely closely monitored.
  • You have a catastrophe that happens, and nobody really knows what’s going on yet, and you need a place for those activities that have highly specialized pieces of equipment and responsive teams to be centered.

In those three cases, I think there’s a requirement for physical space because it’s about the risk calculus of not having closely controlled environments. Likewise, when you can’t widely distribute extremely expensive, highly specialized equipment or people.

Everything downstream of those major cases, we are seeing more technology used to handle some things (such as inpatient recovery). So should we be building these acute care beds, or simply focusing only on critical care hospitals? Are those risks acceptable, and what are the bioethicists saying in their institutional reviews? There are a number of issues like these that haven’t been perfected yet, but I still suspect we’re going to be moving into a very computer-centric kind of space, and that’s going to be the underlying platform of the system of the future.

Learn More about How Bill and Other Healthcare Leaders Are Shaping the Future of Healthcare

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