Health system CEOs are managing much more than hospitals—these days they resemble heads of corporations.
|C.J. Bolster||John Larrere|
As chancellor for health affairs and CEO of Duke University Health System, Victor J. Dzau, M.D., presides over a $3 billion enterprise that includes three hospitals, 1.6 million outpatient visits, primary care, community health care delivery and preventive care, a medical school, doctoral scientists, translational researchers, nursing and physician assistant students, and more.
So perhaps it's no surprise when Dzau says that the job of the health care CEO is getting more complex. "In the past, a health care CEO might have run a hospital or a network of hospitals and focused mainly on execution," Dzau says. "But now our job is evolving as we become the leaders of large corporations that function as integrated health care delivery systems."
There is no role model for today's health care CEO. Before taking the helm at Duke Health System, Dzau was a professor, a department chair and a director of research. When people like Dzau—academics, physician-scientists or physician-administrators—are propelled into the CEO ranks, they face a steep learning curve.
As a clinical leader who worked on the front lines in Brigham and Women's Hospital in Boston, Dzau never gave much thought to human resources, marketing, strategic planning, crisis management or communications. "I used to think of communications as a second-tier function, but now as I run the Duke University Health System I find that human resources and communications are the two most important things I need to think about as CEO."
The reform movement in health care has emphasized the advantages of integrated medicine in leveraging information technology (IT), building common standards and improving the standard of care. Facing numerous challenges in maintaining their independent practices, many physicians have enthusiastically pursued closer relationships with hospital systems. But as the layers of complexity multiply in these large health care systems, the CEO's job only gets harder. Not only does a CEO need to enroll new physician groups into her organizational vision, she also has to make sure that her own executive team models the same kind of behavior and serves as an extension of her own managerial style.
As hospitals directly employ more physicians, the relationship between these physicians and the CEOs of their health systems will become more important, according to John Hillenmeyer, CEO of Orlando Health, a 1,788-bed health system that counts more than 2,200 physicians among its 14,000-plus employees.
"It is a mistake to think of the trend toward physician employment as just an economic transaction," Hillenmeyer says. "Even CEOs of academic health systems will find that there are big differences between managing academic physicians and acquiring a 20-doctor orthopedic group that is used to operating as a private practice. The big issue with governance is that even though physicians may want to line up with a bigger organization like a hospital to get access to IT, they still want a real seat at the table to manage the way they practice medicine. They don't want executives and CEOs without practice experience making clinical leadership decisions. They will be looking for physician leadership."
Some health care CEOs are used to managing their employees the same way a general oversees divisions of his army. But CEOs will surely face disappointment and discord if they attempt to lead physicians by giving orders. A professional service firm model may be the best approach.
To effectively communicate with physicians, the CEO must be able to speak their language. For example, if a CEO wants to make a shift away from paying physicians on a per-procedure basis (as the Mayo Clinic has done), he cannot base his decision solely on bottom-line considerations, but he must show achievement-oriented physicians how the change will improve quality, reduce secondary infections and enable a greater focus on preventive care.
Given the size and complexity of modern health delivery systems, CEOs cannot directly communicate their organizational vision and narrative to each physician employee. Instead, CEOs must rely on an executive team that shares their vision, as well as strong medical department heads who are respected by their physician colleagues.
CEOs should recognize that every organizational narrative inevitably faces counter-stories from dissenters. Effective CEOs will need to use all the communication tools at their disposal—both the direct influence of the bully pulpit and the indirect influence via their executive team—to build a dominant narrative strong enough to overcome any competing stories.
"The most important thing a CEO should remember is that you are there to serve the organization," Dzau advises. "If the organization does not feel supported by you and does not agree with what you do, you will not be an effective CEO, no matter how right you are. Employees want to feel valued, and they want to know that there is someone accountable at the top who listens to them."
Even as health care systems become more complex, CEOs face greater demands on their time from constituent managers. "The difficulty for the CEO is balancing time spent on outside constituents, along with time needed to serve faculty, employees, patients, scientists and students. Since everything requires more time, the real question is how you can create a trusted executive team to address all these issues so that nothing is neglected," Dzau says.
Hillenmeyer notes that as the fifth largest employer in central Florida, Orlando Health has a multibillion dollar impact on the community and a commensurate role to play in economic development and social activism. "The CEO needs to spend a lot of time and energy in the community, creating good will and trust while building the image of his health care system," Hillenmeyer says. "Beyond the work of your government relations department, you still need to know political leaders, weigh the key issues and sometimes join with other CEOs to sit down with the governor or the legislative leaders to have the biggest impact."
In addition, CEOs cannot overlook their responsibilities to the organization's own board of directors. Dzau notes that boards are taking their fiduciary responsibilities more seriously these days and developing closer relationships with CEOs. "CEOs used to see board members primarily as fundraisers, but now they look at potential board members in terms of skill sets," Dzau says.
No matter what direction health reform takes, health care systems are likely to get larger and more complex. In fact, Hillenmeyer believes that the industry will see more consolidation in the years ahead and that CEOs will need to develop their strategic skills in mergers and acquisitions, not just in terms of consolidation, but also regarding strategic alignments.
Given the uncertainties that lie ahead, the best CEOs will have an inherently inquisitive nature. They will constantly seek new answers to old questions. Most of all, they will remain open to new perspectives and new ways of delivering superior care in a shifting health care landscape.
C.J. Bolster is a vice president and the national director of the health care practice for Hay Group in Atlanta. John Larrere is a vice president and the national director of the leadership and talent practice for Hay Group in the greater New York area.