When Margin Becomes The Mission: Healthcare’s (Sometimes) Unholy Pursuit Of Profit

No margin, no mission.

The phrase is usually attributed to Irene Kraus, the nun who led the Daughters of Charity National Health System, who used it to explain that her hospitals couldn’t rely on charitable donations alone.

These days the expression is frequently uttered in healthcare organizations to justify profit-making and revenue-maximizing behavior. The person uttering it is usually acknowledging the natural tension that exists between service to others and sustainability. Indeed, almost immediately after these words are uttered—in management team meetings, in board rooms, at conferences—everyone seems to nod knowingly in agreement and move on from whatever moral dilemma is being discussed.

“No margin, no mission” is the ultimate healthcare conversation stopper.

It’s also a form of healthcare business virtue-signaling. Margin, we are told, is the defender of the mission. And without it, there can be no mission. Therefore, margin—meaning profit—becomes the highest of all organizational virtues.

But what if the mission itself is fundamentally unjust or inadequate—or just wrong?

And what if the margin is ill-begotten?

And can it be taken to a distracting extreme?

In healthcare services organizations, managed care companies, pharmaceutical companies, non-profits, and for-profits, these questions are inadequately debated and discussed—and insufficiently challenged.

And perhaps our failure to debate and discuss them have led to the overgrowth of segments of the healthcare sector; price gouging and predatory billing practices; and a failure to remain focused on social good.

Service Delivery or Health?

Many hospitals and health systems’ missions are simply to deliver services.

Take for example, one non-profit mid-Atlantic hospital that I’ll call XXX: “The mission of XXX Hospital is to provide competent, innovative, and accessible emergency and acute care services for the residents of XXX.”

On the surface of it, this sounds pretty benign and reasonable. One could conclude that the hospital should make as significant a margin as possible so that it can be better at delivering hospital services to as many patients as possible.

But is there a higher or better mission for Hospital XXX? For instance, to keep people healthy? Or to work to obviate the need for their healthcare services in the first place?

Hospital XXX’s margin—achieved through the delivery of services, some of which are the result of poor upstream primary healthcare—may not be a margin that we should all feel that proud of or good about. After all, growth in volume or margin may only come at the financial and health expense of patients and their families. If a hospital is good at delivering dialysis services—but the need for dialysis was avoidable in the first place, should we feel good about it? And seek to grow in order to deliver as many dialysis services as possible to as many patients who need them? I’m not so sure.

Changing the Goal Posts

Most pharmaceutical companies have mission statements that balance patient access, research and discovery, and shareholder value. Pfizer’s mission, for example, is “to become the world’s most valued company to patients, customers, colleagues, investors, business partners and the communities where we work and live.”

Statements like these fail to acknowledge the inherent tensions that exist between patient value and shareholder value. What’s more, “No margin, no mission” can be molded to meet a variety of purposes depending on the situation and, more significantly, one’s interpretation of the word “mission.” On one day, Pfizer’s mission can be maximizing patient health through innovative medicines. On the next, it can be maximizing shareholder value.

When the mission is interpreted flexibly, so, too, can the tactics employed to achieve it. This is how companies whose mission is to cure disease can justify pricing its products beyond the reach of the patients who need them.

The very same flexibility in interpretation has led healthcare services and managed care organizations to pursue prima facie offensive business practices such as surprise billing and aggressive utilization management. After all, though the stated mission of these organizations may be to improve health, their unstated mission is organizational self-perpetuation at all costs, no matter what. No wonder, then, the other aspects of the mission seem to always take a back seat.

How Much Is Too Much?

Then there is the case of healthcare organizations that have been so good at achieving large margins for so long that they almost don’t know what to do with them. On the surface, these reserves represent “rainy-day” funds. They’re supposed to be used when disaster strikes, enabling the organization to be prepared and to sustain itself through that inevitable storm.

A worthy concern.

But could part of those funds be used to refocus the organization on some deeper commitment to intractable problems faced by communities and society at large? For example, to expand access to mental health, to achieve health inequality, or to enable scientific research into untreatable illnesses?

In other words, could these reserves be used to take high risk, high reward bets in the service of the mission?

If only. Too many organizations develop such significant reserves that the statement, “no margin, no mission,” starts to feel extreme and disconnected. For organizations with the market power to extract it, no margin ever seems to be enough. Prudence is replaced with risk-aversion. There is such a thing as too much of a good thing and all of us should ask, “how much is too much?”

Just Words On A Page?

Don’t let these concerns make a cynic of you. I, for one, am inspired by some very visible mission statements that call for making their organizations obsolete.

Houston-based MD Anderson Cancer Center’s mission is to “eliminate cancer…through outstanding programs that integrate patient care, research and prevention, and through education…” Of course, achieving this mission is difficult both practically and scientifically. Some might say it’s more aspirational than practical. And it still lends itself to the distortions of “no margin, no mission.”

Also, some reading this column might say it’s overly focused on the literal interpretation of mission statements and the notion of “no margin, no mission,” and divorced from the realities of long-term organizational management. In other words, all organizations need to sustain themselves.

But my conviction is that organizational leadership’s job is to close the gap between the mission statement on the wall and delivering on it in the real-world.

Put simply, margin should be a means to achieve an organization’s mission—not the mission itself.