Ep. 027: Lessons from the $8 Billion Healthcare System's Collapse

Welcome back Bridge Builders to Bread to Lead, the podcast transforming leadership across industries. I'm your host Dr. Jake Taylor Jacobs and I'm thrilled that you're here. We're currently ranked as the 30th top business and leadership podcast nationwide. And it's all thanks to listeners like you. Bridge Builders, if you haven't already grabbed a copy of my book, Bread to Lead on Amazon, it's packed with strategies to elevate your leadership game. Got questions or ideas for the show? Visit us at breadtolid.com And if you're finding value here, please take a moment to rate and review us on Apple Podcast. Your support helps us reach more leaders. Now let's dive in and continue breeding excellence in leadership. Today's episode awaits. Bridge Builders. Bridge Builders, first and foremost, welcome back to Bread to Lead. This episode is a very important episode, episode 27, as we are going to start tackling a lot more real-life case studies. Really showing the concept of Bread to Lead and bringing it to life with things that are happening in the healthcare space with hospitals and organizations all across the country. And episode 27, the purpose of it in the title is the $8 billion leadership failure. Lessons from a healthcare system's collapse. And for those of you that are interested in Bread to Lead and you're not in the healthcare space, the reason why this podcast, to my belief, is still a very, very important podcast for you to listen to is because we're not looking at healthcare business or operations or leadership in the scope that it only fits in healthcare. We're just using healthcare, the space that my company Sips Healthcare Solutions is in. We're using healthcare and organizations as a niche or a focus to build off of. So all of the lessons that you'll learn if you're new to Bread to Lead, all of the lessons learned are transferable to any organization that you can imagine it fitting in. One being because some of you all know I'm a corporate fixer by trade. So I've worked with companies in every industry that you can imagine turning them around. But healthcare, the reason why I love the complexities of healthcare is because it's typically not seen solely as a business. Or an operational model. And you typically don't see big giant, eight billion dollar companies just go tumbling down like we're going to be talking about today. So if you're new to the podcast, make sure you understand that this is a podcast, which means that when we get started, you should be having your notes out, screen shot in the evening, bookmarking certain things that we say that when you go back to it, you can always get the information. So that you can apply the goal of Bread to Lead is to ensure that as you leave or as you lead, you can take the information that we give you and apply it immediately to your organization. We want to thank every single person that's allowed for us to be able to position our organization or even our podcast as a top 30 podcast in the entire country in the business class. And we love everyone that is sharing constantly sharing our podcast. And then we have leaders from the C-suite all the way down to technicians in the hospital facilities that are reaching out, letting us know that they are not only applying the information, but they're seeing drastic change. So I'm excited about that. So let's go ahead and dig into a bridge builders today. We're going to be diving into something critically important. Okay, the difference between planning for the future and actually leading from it. And to illustrate this, I do want to share a powerful real world example that's unfolding right now in the healthcare industry in May of 2024. Steward Healthcare, one of the largest private hospital systems in the country, filed for bankruptcy. Steward Healthcare, one of the largest health hospital systems in the country, did file for bankruptcy. And now on the surface, this might look like just another business failure. But what happened at Steward offers us profound insights into the difference between planning and true future focus leadership. I want to break this down a little bit. And if you all love these case studies a little bit more than just the traditional way we've been doing our podcast episodes, please go to bread2lead.com or find me on LinkedIn at Dr. Jake Taylor Jacobs or on Instagram, and let me know what you love to hear most and what you want us to dive more into. So we're going to break down what happened with Steward Healthcare. In 2010, Steward Healthcare was established as a for profit hospital system. Their strategy looked absolutely amazing on paper. They would acquire struggling hospitals, turn them around through operational efficiency and build a scalable healthcare network, much like what my private firm would do and still does for private, small and mid-sized businesses, acquire them, turn them around and sell them or keep them in our portfolio. Or much like what we do here at Sips Healthcare Solutions, we don't acquire hospitals, but we are called into hospitals to turn around a lot of the surgical services departments. Steward Healthcare had a CEO, Dr. Ralph De La Tour, who seemed perfectly qualified, a former cardiac surgeon with both medical expertise and business acumen. I just want to park here parenthetically just for a moment and I want to say that just because someone has business acumen doesn't mean that they're perfectly qualified to actually run the business. And all too often that people think that education alone will permit someone's ability to be able to run a sizeable organization. I always like to liken it to if you would never put a first year surgeon that just got out of grad school, medical school, in the seat of actually doing a heart transplant because they have the medical acumen. If you would never do that when it came to saving someone or performing a surgery, we should not be doing that with businesses, especially with business models where the consequence of not running it correctly is literally life or death. So of course, he seemed like a perfectly qualified fit. But here's where it gets interesting, Bridge Builders, despite having what appeared to be all the right pieces, leadership expertise, financial backing, and a clear growth strategy, the organization failed spectacularly. By 2024, which is 14 years later, they were facing bankruptcy, closing hospitals and leaving communities without crucial healthcare services. All right, without crucial healthcare services, this failure wasn't about the lack of planning. Stuart had plenty of plans. What they lacked was true future focus leadership. And let me show you the difference because this is crucial for every leader to understand. When you're planning for the future, you're essentially trying to extend your current reality forward. You look at trends, make projections and create strategies based on what you can see from where you are. But when you're leading from the future, you're doing something fundamentally different. You're starting with a clear vision of where you need to be and then working backwards to ensure every decision serves that future. So let's look at how this was played at Stuart. They're planning focused on growth through acquisition, which is a fine business model if you truly weighed out all the risk and it's nothing that's new under the sun. They acquired dozens of hospitals across the United States and internationally. And on paper, this looked like a future focus leadership. But when we begin to dig deeper, we see they were actually making a classic planning mistake, confusing activity with progress. Before we move forward, I do want to let the bridge builders know all of you know that transformational leadership starts with the right mindset. Go and get my book, Bread to Lead on Amazon today and learn how to lead from the future instead of just planning for it. Go to Amazon or go to bread to lead.com to get a copy of my newest and latest book, Bread to Lead. So here's what true future focus leadership would have looked like at Stuart. Okay, so versus us thinking about what should have happened, we're going to break down what it really looks like if we really want to talk about planning for the future in leadership. Okay, instead of just asking how can we grow? Stuart, the staff, the committee, the board should have been asking deeper questions. What will be sustainable with our health care delivery in the next 10 to 20 years? How do we ensure that our growth serves our communities long term? What capabilities do we need to build, not just by? And let me break down three critical failures at Stuart that illustrate the difference between planning and leading from the future. First, at Stuart, they confuse expansion with evolution. Stuart Health leadership focused on getting bigger rather than getting better. They acquired dozens of hospitals, but reports show they weren't investing in maintaining these facilities. We saw pest infestations, equipment breakdowns, and deteriorating conditions. This is what happens when you plan for growth without leading from a future vision of excellence. Secondly, they prioritize financial engineering over operational excellence. The leadership team backed by a private equity focused on short-term financial metrics rather than building sustainable operational capabilities. They were playing a numbers game instead of building a future-ready health care system. And I want to stop here and say, this doesn't just happen in this health care space. We see companies all the time that are so focused on growth that operationally it is impossible for that organization when it finally hits its real barrier. That forces it to focus on operational excellence, capability, and ensuring quality service for communities that organization would serve. When we only think about growth in the numbers game, business is not about numbers. Business is about delivering a service that is so good that customers, consumers, clients, and patients find so much value in it that they are willing to pay whatever price point that you put. And from that price point in paying it, you build your organization to support that. So service has to be the full focus of the entire organization that you build in quality of staff that are there. So the first one, they confuse expansion and evolution. The second one, they prioritize financial engineering over operational excellence. And thirdly, this one is crucial, bridge builders. They failed to build an organization that can sustain itself beyond their immediate plans. While Dr. Dill Latore reportedly receives the substantial compensation, hospitals were struggling with staff shortages and basic maintenance issues. This is what happens when leaders optimize for the present instead of building for the future. Now let me share something powerful about true future focus leadership. It's not just about having a vision. It's about making decisions today that create capabilities for tomorrow. Let me show you what that looks like in practice. When I work with organizations on future focus leadership, we use what we call future back framework. It starts with three fundamental questions. What must be true about our organization and the future for us to fulfill our purpose? What capabilities do we need to build now to make that future possible? And thirdly, what decisions can we make today that will serve the future while maintaining current operations? Bridge builders, are you ready to transform your leadership from planning to true future focus? Visit bread2lead.com for exclusive resources and strategies that will help you lead for the future. Let me share how this future back framework could have changed the trajectory at Stuart. And most importantly, how you can use it in your organization. Instead of just acquiring hospitals, a future focus leadership approach would have started with building sustainable operational excellence. Let me show you what that means. So it's kind of ironic that their business model said that they would take underperforming hospitals change them around, make them more operationally efficient and then tuck them in the portfolio. But the very basis of the business plan of operational efficiency was not their focus. It was not. So at Stuart, we saw a leadership team making decisions based on immediate financial metrics. They were playing what I call the now game. Focusing on quick wins and short term gains. But true future focus leaders play the next game in the after next game simultaneously. Here's what that means. The now game is about current operations and immediate results. The next game is about building capabilities for emerging opportunities. The after next game is about creating options for future possibilities today. And let me give you a concrete example of how this works. When you're leading a health care organization or any organization, the now game might be about current patient care operational efficiency. The next game will be about developing new care delivery models and building digital capabilities. The after next game will be about reimagining what health care might look like in a decade in positioning your organization to lead that transformation. Stuart's failure teaches us something crucial. You can't sacrifice the now game for the next game or vice versa. They sacrifice current operations for expansion plans, but they also fail to build for the real future of health care. They were all playing neither game well. So let me share with you four pillars of future focus leadership that I teach organizations. Get a pen and write it down. I'm going to share with you four pillars. And this also goes for anyone that's leading a department. Where do you want to take that department? Now create a future back framework from it and ask yourself, do I have the right staff? Is my talent, is my team developed enough when I ask for consultants to come in? Are they always plugging holes? Are they helping us to move forward the organization to where we want to go? Do I have career pathways that align with what the organization will look like in the future? What am I doing to be able to encapsulate this vision that I have for this organization, for my future, for this department, to ensure that it doesn't crumble as we continue to grow? Future back thinking. This isn't just about planning. It's about truly understanding what capabilities your organization needs to build for the future. And at Stuart, they needed to ask what capabilities would a sustainable health care system need in 2030 or 2040? Instead, they were focused on immediate expansion. So when we're talking about truly building an organization, especially when you talk about acquiring other facilities, clinics, hospitals or businesses, you got to ask yourself, what is the true plan of this acquisition? And do we have enough inside of our organization or can we get resources outside of it to ensure operationally we're effective? Now, this also goes to the lower level manager or leader. So many people are so focused on getting a promotion that we don't ask ourselves, what are we going to do once we get the job? What initiatives are we going to place? And I love the presidential campaign because they have to talk about the things and the initiatives that they already have been thinking about to put into place so that we can be able to what? Move it forward. Now, what happens here is although you have these plans in place, it still does not take away from the simple fact that you now have to gain buy-in from all your other stakeholders to ensure that that plan can go into place. But if you do not have a framework from what you're building everything from, this is where the difficulty starts to happen when people get promoted but are not ready for the promotion. The promotion is not just about you making more income. It's what impact are you going to create as you are stepping into that position. So the framework, the future focus leadership framework, when we talk about building it's not just a plan. You have to think about what will the organization look like 10, 15, 20 years from now and you build your organization from the vision that you have. So I'm working toward there. I know where I am and I'm building up milestones that we hit along the way. No different than an architect building your home. The final product is a home. The final product is a car. The final product is a, you know, is whatever the architect is building or whatever they're drawing out. That's the final product. The issue is that when we start building without a final product in mind, so we're just one after the other making mistake after mistake after mistake without considering what will the organization look like before. One of my favorite leaders in the healthcare space is named Angus at Boston Children's. He already has an eight year plan for when he's going to retire and he's building up his leaders and framework. We're coming in to partner with him. We're building up his leaders and framework and building what we call our next up leadership pipeline where we're helping them develop the talent within the organization and managing that talent by ensuring that the right people get placed when it's time for them to get placed because he is trying to create the next level of leaders from the bottom up. So he's thinking of what his move is going to be for the benefit of Boston Children's for when he retires. He already has that framework. Many of us wait. We do nothing. And the hospitals don't force the leaders to have to prove a case of where are you taking this department or these set of departments in the next five, 10 years. How long are you committing to and with that commitment? Are we going to have a bulletproof plan to actually execute it? The second thing capabilities building. True future focused leaders invest in building capabilities not just acquiring assets. This means developing operational excellence leadership depth innovation capacity cultural strength. You have to think of an organization or your department like a table that needs four legs to stand up. Operational excellence. Yes, you can have all the processes systems in place. But if you have any leaders in place, no, no innovation that takes place. Retention is going to be gone. No good leaders. If they're not in place. Guess what retention is going to be out the window cultural strength. No culture retention is out the window. So how can you build an operationally excellent facility organization or department if you continue to start over with the talent within your organization every one to maybe even three years. So you have to consider your organization or your department with four legs. I need operational excellence. How what's the depth of my leadership? Do I create an environment where innovation is at the forefront of our organization? And the fourth one, what is the culture is does our culture there is a pause? Do we have an identity as an organization to ensure that they're getting everything that they need? Now, number three, sustainable resource allocation. This is where Stuart really missed the mark. Future focused leadership requires balancing current operations versus future investments. Growth versus maintenance. Short term profits versus long term stability. There's a there's a hog and dies dance. A ballroom type of dance that you need between servicing today and investing in the future and you can't be so focused on today because you won't have a future and you can't be so focused on the future because you won't have anything today. You have to have almost like a reward system as we build this and hit this milestone will invest in the future. When we build this will create innovation. When we build this will invest into research. When we build this will create these are all stepping stones that you must create in order to really take your organization to the next level. And fourth, cultural architecture. This is perhaps the most crucial element. Future focused leaders build cultures that can create a future. Future focused leaders that can sustain excellence over time. At Stuart. We saw a culture focused on financial metrics at the expense of operational excellence in patient care. That's what led to the bankruptcy. Not that they didn't have good assets that they offloaded that could offload. It's because the the main premise of their business model was to acquire underperforming hospitals. And make them more operationally efficient. The issue was. It is obvious that they didn't have enough leaders in place that put an emphasis on operational efficiency. More than bonuses checks compensation for more acquisitions for more money, more revenue to be made. Now let me give you specific strategies for implementing these principles into your organization. First, create what I call future focused forums. These are regular sessions where your leadership team steps out of the day to day operations to explore potential features. But here's the key. These aren't just brainstorming sessions. They need to result in specific action plans that connect future vision to current decisions. Second, implement capability mapping. This means regularly assessing what capabilities do we have? You know what capability capable means? Capable means in Scripture, X is 18, Jethro tells Moses to find leaders who are capable. That means that they already have innately inside of them the ability to execute the job not only well, but efficiently. Leaving as little waste as possible. So when I look at the capabilities of an organization, I'm looking at how well something runs, how developed my team is, or do we even have the capability as an organization to do what is being asked efficiently, effectively, and proficiently? Now watch this. Now after you look at your current capabilities, the next question you must ask yourself is, what capabilities will we need in the future? I know here at Sips Healthcare, I'm very much aware of what we need today. But I'm even more aware of the talent, the systems, the processes, the structure of the organization. I'm well aware of what we're going to need in the future for where we're taking this organization. And then after you figure out the capabilities of what you need today for your organization, and the capabilities that you will need for the future for your organization, then you have to measure the gap in between. And how do we systematically build the capabilities that we need to start bridging the gap? And you bridge the gap, not with cement, with the ladder. One step at a time. There should be a ladder from today's capabilities climbing up to tomorrow's capabilities needed to ensure that we systematically have built the right things in place to ensure that we're good. Now thirdly, we need to develop sustainability metrics. This goes beyond traditional KPI to measure. So many people, KPI, KPI, KPI, KPI, KPI, KPI, it's the buzzword, KPIs, KPIs. KPIs, no different than the lean method. Everybody wants to be lean, six sigma certified lean. It's just become buzzwords. When I'm really trying to build an organization that is more than just an organization that's full of KPIs, we build KPIs as if we don't have the human element within the organization. We're not talking to computers. We're not talking to AI alone. Even with computers in AI, you must bring context for the systems to actually be able to produce to the capabilities that we are asking. So sustainability metrics are, what is our capability building process? We know what we are capability wise as an organization. I've tested all of my leaders. I know where they are and I know what they must grow to in order to stay in the organization at the pace that we're in. I know their developmental abilities. I know our system structures. I know that the technology that we're using today can get us by today, but that's not the technology that we need in the future. So I need to create a building process of what will the transitions look like and what am I willing to invest today to ensure that the capabilities that I'm building. The capabilities that I'm investing today serve us today and also builds for the future tomorrow. The second thing, culture of health. If your culture is shoddy, there's nothing you can implement that will change anything if your culture is shoddy. Whatever the bad apples that are in your organization, I'm sorry, if they've been a bad apple for more than two years, they're going to stay a bad apple. Get rid of them. Three, long term value creation. What is the long term value creation? Stop just thinking so short-sighted. There's so many organizations and executives that I've helped being able to turn their organizations around. And the only focus was why are we so focused on a short-sighted? You've been short-sighted running your organization or running your department for so long and it has not worked, has it? So let's just try if we start thinking about the long format, the long term value creation. And let's see if something changes. I'm not saying to get rid of the focus of today's problems, but we can't solve today's problems with today's solutions. We have to solve today's problems with tomorrow's solutions. What can we innovatively do that can ensure that this will never be an issue again? And then the last one, when we're developing sustainability metrics, the stakeholder impact. How does it impact the stakeholders? The Stuart Case teaches us something crucial about metrics. They were measuring growth and financial returns, but they weren't measuring the health of their organization. Literally and figuratively, they weren't tracking deterioration of their facilities, the erosion of their culture, and the sustainability of their operations. So with the future ready assessment, I'll give you a tool. We're going to focus on five major points. Operational excellence. Are your current operations sustainable? If they are not, you need to change them. Do you have the systems for continuous improvement? If you do not, you need to invest in it. Is excellence built in your processes? If people can shortcut within your organization without any reprimand, without anybody holding them to a standard, you have an issue. And I'm sorry, being overworked and not enough people to help don't fix that problem. Number two, financial health. Is your financial model sustainable? Are you balancing short-term and long-term needs? Do you have the resources for future investments? It's financial health. If not, we need to solve that. You may say, Dr. Jake, listen, I'm just running a department. I don't have access over deciding budget. Well, you need to be trying to figure out how can you get access to whoever is approving your budget and building a relationship with them so they can see why they need to find more resources for you so you can make sure that you're building an efficient and profitable department. People in culture. Are you developing future leaders? Is your culture aligned with future vision? Do you have the right capabilities? That's it. If you're not going to pay top dollar for leaders that already have it and you want to pay less money for talent, the bridge is that means you have to invest in developing that talent. Yes, when you develop leaders within your organization, it is a proven fact that the cost of keeping that leader is a lot less costly than hiring someone that you do not know that was not built in your organization. Dr. Jake, what do you mean? We still have to pay people equitably. We're not talking about the direct result of equitable pay. We're talking about the phantom tax. When someone's coming into your organization already with the set skill sets, you're going to be paying them premium or top dollar, which also means that if they already came with that set skill set, they don't have any real loyalty to your organization because they already have everything built. They're going to be there. They already have in their mind. I'm going to stay here for a couple of hours, for a couple of years, and then I'm transitioning to my next big play. So there's no investment or vested period where they feel indebted to the organization for helping them make them. This is why you will see even, I want to make it personal, this is why you will see people with crappy parents still pay hummests to parents and still feel committed to their parents and their family because there are things that they still give their family credit for in making in them. So there is a loyalty factor there. But when you see children that were not raised with their biological parents, that were raised, maybe adopted, raised with a grandma, raised in a different dynamic, and they feel like they built everything themselves, they don't have that same loyalty factor to family and friends like everyone else would that felt like that family or friend actually invested in them. Same thing with coaches, same thing with organizations, same thing with businesses, same thing with friendships, same thing with marriages. If I feel like we built this in our marriage and you are a very big benefit to me in growing my business, of course you deserve 50% or whatever the cut is. But if I feel like I built this before you, we got into the relationship, I already had these skill sets, then there is no loyalty there when we part ways on part of what I had, you leave it with what you had. There is nothing there. Which is why I proactively always tell organizations, if you are not investing in the future of your leaders or the future of your organization, you will always have an attrition issue. Your attrition rate will always be extremely, extremely high. Innovation capacity, can your organization adapt to change? Do you have systems for innovation? Are you investing in future capabilities or are you still making decisions based on yesterday's successes and pushing away the future innovation? Can I tell you something? It doesn't matter how many people pushed away the phone. The beeper was going extinct. It doesn't matter how many of you don't want to use AI. AI is still progressing within our organizations and within our society in the 15th stakeholder value. Are you creating sustainable value for all stakeholders? Is your impact positive and lasting? And are you building true trust and credibility? If Stuart would have just done that short assessment long before their crisis, it would have shown that while they were growing, they weren't building a sustainable organization. You won't. So I want to wrap up the three things you need to focus on. Balance is everything. You need to maintain current operations while building future capabilities. Create short-term results that work on knocking out your long-term vision. Once I build my long-term vision, I create milestones that are leading to accomplishing that vision. Without vision, the people shall perish. You got to have a vision that everyone can do it and then you write it down and make it plain so that everyone can see it. You want to meet today's needs while preparing for tomorrow's challenges. That's true. Key principle to take away. Culture eats strategy. Your culture eats your strategy. Terrible culture. It doesn't matter how much money, it doesn't matter how much your investment, it doesn't matter how much you train, how much you try to pretend that you're family, it doesn't matter. A poor culture eats any strategy any day. A great culture can outperform somebody with a better strategy. You want to support and invest in continuous improvement. You want to embrace innovation and change and you want to value sustainable excellence over short-term gains. And then the third thing, leadership is about legacy, not about a paycheck. If you have people in leadership that cares more about their paycheck than they care about actually their legacy, scripture says that your name is more precious than silver or gold. So if I find people who are more focused on silver and gold than their name being good with our organization and representing our organization, they're not the right leaders to be in place. At all. What are we building that will last? How are we developing our future leaders for when we are retired and leave out of here? And what impact will our decisions have years from now? And if you find a leader that has a great work, a great habit of leaving the organization without developing talent or developing someone who is just as capable before they leave, before going to another big check. Listen, if somebody leaves their organization just because we offer a higher pay salary, I don't hire them. I tell them stay where they are. Why? Because I would much rather build a leader in the position than having somebody that's going to bridge, that's not, that's just going to plug a hole, not bridge the gap. Bridging the gap is sowing the wound clothes. Closing the hole is putting guys in there and saying, hey, the bleeding is done, you know, putting guys in a bandaid, you should be good. No, it needs to be cleaned out and sewn clothes, stitched clothes. And remember, Bridge Builders, true future focus leadership isn't about predicting the future, it's about creating it. It's about making decisions today that will serve your organization and its stakeholders for years to come. This is Dr. Jake Taylor-Jaco signing off. Thank you for tuning in to another episode of Bread to Lead. Until next time, keep bleeding, keep building for the future and keep breeding excellence in everything you do. Remember, Bridge Builders, the future belongs to those who created it. Not just who planned for it. Make your leadership count. Thank you for joining me today. Bridge Builders, I'll see you next time on Bread to Lead. Go to breadtolid.com. Get your copy of Bread to Lead. If you are a leader, get a couple of copies of Bread to Lead and start that to invest in your leadership development within your organization. Secondly, have them follow this podcast. Follow, like, share, all the cool stuff and subscribe or whatever you do to join this podcast. And please share it. Leave a review. Continuously leave reviews of the value that you're receiving from this podcast. It helps us with our rankings to let everybody know that we're here. And lastly, once you have done all of that, please, when you go to breadtolid.com, please share our free Executive Edge community. This is a community where we're giving you access to free masterclasses, free resources, and access to special interviews that won't be on public platforms, only in a community with executives and leaders of like that you are not going to want to miss. So please, if you're listening right now, go do all of those things. Until next time, I love you. There's absolutely nothing you can do about it. Peace, and I'll see you later.