Change of culture in a rapidly evolving health care environment

When a health system asked me to facilitate a Board discussion on physician alignment and integration on November 12, 2010, I was already committed to giving a keynote on the future of health care for the American Institute of CPAs in Las Vegas on November 11. Although I usually fly Delta or USAir where I have priority frequent flyer status, the only way I could get to the Board meeting was by flying from Las Vegas on Southwest Airlines.

My experience on Southwest reminded me of the importance of culture in navigating change in a rapidly evolving environment like we have in health care in the United States today. It is all too easy to focus on all the technical issues hospitals face in setting up Accountable Care Organizations to handle the inevitable global payments that will replace the current fee for service system. This blog is a plea for hospitals and doctors and consultants to pay attention to both the technical and the cultural or adaptive challenges we face in transforming a $2.5 trillion American industry.

Recent articles on companies outside of health care have highlighted how important culture has been to the success or failure of Southwest Airlines, QVC, and Zagat to respond to changing business conditions. Southwest’s COO states “our culture is our biggest competitive strength,” and the flight attendant and pilots’ union worry about how the recent purchase of AirTran will affect their unique culture. I have seen Southwest pilots help clean up the cabin, and the flight attendant on my recent trip told me she was giving up her day off because the company needed her help. QVC is trying to use the same methods and culture that made selling on TV popular with Internet customers. And Zagat, which had cultural troubles moving from book format to online, is now hoping that smart phone applications will reinvigorate their business model.

Harvard’s Ron Heifetz differentiates between technical and adaptive work, and I have found this concept useful in working with health systems responding to payment reform. Everyone involved in hospital physician integration efforts will need to undergo a cultural (adaptive) shift because the healthcare reform law and the transition from fee for service to global payments mean the old ways of doing things are not sustainable. Even if all the technical tasks are superbly done, difficulties will arise if the leadership, management, care teams, and physicians still have the old mindset and culture.

In attending conferences and working with hospital CEOs, I have found that there is more emphasis on the technical tasks that need to be accomplished in order to form an Accountable Care Organization than on the culture such a change will require. I have heard a lot of keynotes filled with power point slides on defining the role and reporting structures for newly formed physician leadership teams; creating system-wide operational councils; and specific legal structures of ACOs so they can accept and distribute global payments. These are all important technical tasks, but they will fail if the culture does not change too.

Two concrete example may help make this point. Sony engineers came up with the equivalent of the iPod long before Apple. However, Sony ran into internal obstacles because of its culture. Sony’s leadership and organization was designed to come up with improvements to the next generation of CD players, but the new iPod technology threatened how Sony’s leaders and engineers thought about their product line. They could not overcome the cultural barriers to marketing such a revolutionary product. Sony’s failure was not one of technical expertise; it was and adaptive failure of cultural mindset.

My travels found me in Savannah, Georgia recently having lunch with Joe Scodari who sits on three Boards of Directors in the health care space. Scodari related a similar story of cultural failure to adapt when Kodak engineers invented the digital camera; the film culture at Kodak did not approve marketing such a transformational product that would cut into Kodachrome film sales. Kodak missed out on digital cameras, and film sales plummeted anyway.

So how do hospital system CEOs avoid the fate of Sony and Kodak as they respond to the sweeping changes in the new federal health care reform law? They must focus on both technical and cultural issues. Jane Kornacki and Jack Silversin who pioneered the physician/hospital compact model and Bob Kegan and Lisa Laskow Lahey who developed the immunity to change model for transformation have much to teach all of us. Physician leadership academies are another essential ingredient in transforming culture among newly employed physicians who are not used to being employees.

Southwest Airlines made money when other airlines floundered; they attribute this success to culture. Hospitals that focus on culture and technical tasks will have a better chance of survival in an environment that is increasingly saying you better get ready to survive on Medicaid rates, not private insurance rates.

Kent Bottles provides health care leadership consulting and blogs at Kent Bottles Private Views.

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  • John Ryan

    The culture of the hospitals in my area is to milk the bottom line. They harass my patients with collection calls and interest rates on balances that would make Visa or Mastercard blush. These same hospital execs lecture docs all the time about patient safety and discharging early, and then turn around and cut nursing staff while redecorating the hospital lobby every few years.

    Is this the culture I need to embrace to succeed in the new era of health care “reform”?


    When the money dries up to pay the producers of revenue and providers of care, the system risks failure. It is human nature. I have no intentions of gleefully “taking one for the corporate team” and I don’t think that I am alone.

  • Marcio von Muhlen

    The classic treatise on disruptive innovation “The Innovator’s Dilemma” by Clayton Christensen gives a good explanation regarding Sony and the iPod – in short, their customers were not directly asking for it and established companies have difficulty shifting resources to emerging market segments. Having a culture where employees are generally happy towards their employer (and willing to pitch in with extra work hours and less-interesting work) is not necessarily the same as one in which the employer adapts to new technologies. I’m guessing the same will happen with Healthcare – innovation will come from smaller companies that aren’t already doing well with the existing system.

  • Doc99

    Hospitals’ gobbling up physician practices – Anti-competitive practices take center stage. Big Insurance, Big Medicine, Big Government, Big Loss for Patients.

  • jsmith

    Dr. Bottles has drunk administration’s Koolaid.
    I have a better idea. Undermine the ACOs. Resist them tooth and nail. Be uncooperative. Look at the protesters in Egypt and Wisconsin.
    Look, the hospital administrator in my area is pure evil. A nice guy in person, but pure evil at work. He is a businessman, and his goal is to maximize his wealth and power. Period. If pt care is improved in this manner, fine. If not, that’s OK with him too. Every hospital administrator I have ever met is the same.
    I am not on his team, never will be.

  • Fam Med Doc

    Dear Esteemed colleague Dr Kent Bottles,

    I read your blog, “What Would A Truly Patient-Centered Accountable Care Organization (ACO) Look Like?” (readers- click on the link above Kent Bottles Private Views, its a good, short read). It was an impressive piece describing hospitals & the ACO’s in the future if they were the best they could be. Possibly, Dr Bottles you are a visionary.

    But if you are a visionary, you are DECADES before your time & you will have passed away or in the final years of your life when anything vaguely NEAR what you described in your piece comes into reality. Your piece was on of the most DELUSIONAL medical pieces I have read in quite some time (and I read a lot). Do you, or anyone else who read his blog, actually believe that in this country where people shouted “death squads” when Primary Care docs were scheduled to be paid for end of life counseling, that your fantastical ideas on the ACO would actually come to pass? Not in your lifetime. And possibly not in mine (I think I am a generation younger than you) & that’s sad.

    Our great society, as much as I love the U.S.A, is far too politically polarized, it’s citizens to obese (30% of the population), & our general societal to ready to refuse to accept change to ever in the near future to accept such radical & (unproven) revolutionary ideas.

    Yet, without any PROVEN EVIDENCE, we physicians, ESPECIALLY we Primary Care physicians are being urged, coaxed, cajoled, educated to soon join these ACOs. And it’s funny how it’s the hospital administrations that are doing the courting. They haven’t, I know mine hasn’t, cared about primary care in the past but now they are just so…INTERESTED.

    Nonsense. They want my patient panel in THEIR ACO that I have worked like a DOG to build for THEIR profit. Not mine.

    Show me THE EVIDENCE that these ACOs will further MY profit. Oh, wait, there is none. We are just going down path of continuing to pay Primary Care docs mediocre pay but just calling it another name, the ACO. I hear this is similar to the stupidity of the wave of managed care in the 90′s that was supposed to fix salary disparity between Primary Care & specialists, as well as control costs. It really didn’t help patients much & CERTAINLY didn’t help Primary Care.

    Otherwise, I agree with the previous poster jsmith, “Undermine the ACOs. Resist them tooth & nail. Be uncooperative.”


    • jsmith

      Well said. A lot of ACOs will be poorly-run staff model HMOs in drag. A mini-Kaiser with your local greedy, bonehead hospital administrator running the show and, most likely, running it into a ditch. The payers decreasing payments steadily, the primary care docs outvoted and outgunned. An administrative, financial and clinical nightmare.

  • imdoc

    I agree with above.
    Using Southwest Airlines is not a good analogy for ACO’s. Southwest exploited markets which big carriers were not serving. Initially, they were competing with ground travel between minor destinations. Low cost structure, rapid plane turn time, and other innovations gave them a way to compete. All of this was in spite of competition and regulations.
    The question is asked how the existing large entities will not repeat mistakes made by others that missed the next big industry development. In many cases, the big guys will fail. This is the natural order of things and is due to inertia of the status quo in any large organization. The best way to stave off real change is sweep everyone into large, complex, sluggish behemoths by force of gov’t fiat.


    A meeting has been called by our local hospital inviting representatives of all of the remaining non-hospital owned practices to a sit down to discuss the new ACO that they are developing. I will be representing our group. It should be interesting.

    I seem to remember a similar meeting called of the “5 families” by Mikey Corleone. If we are lucky, maybe it will be the better of the options….an offer we couldn’t refuse.

  • jsmith

    Let us know how it goes. I’d be interested to know.



    I will do that and do my best to tame my bias. I am sure all will go well.


    Mo Green

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