SKILL 5: Financially focused
Important as it is to develop new models of care for the long term, declining Medicare payments and the demands of the Affordable Care Act have put many hospitals in an immediate financial bind. Improving efficiency through productivity and effective financial management is a strategic priority.
But while operating efficiency has been important since the advent of DRGs, value-based payment raises it to a whole new level of complexity that the new CEO must master. “It means having to think about efficiency across the entire spectrum of care, not just vertically, but how to operate as a network of care and use the network to gain new efficiencies,” Geffner notes.
That requires mapping the system and how the patient moves through it, Geffner says. What are the patient’s needs? How do we bring that knowledge to bear to create a new kind of delivery system?
As with clinical leadership, the CEO doesn’t need to be a chief financial officer, but the top leader does need a firm grasp of how changing reimbursements and financing affect the system’s ability to transform into an integrated network, Dalton says. “With bundled payments and capitation, reimbursement has strategic and operational implications that can’t just be left to the CFO. It takes a team — that is a word that is more important for the future CEO. You can’t understand this all by yourself, you need to restructure to be more collaborative internally.”
SKILL 6: Matrix manager
With the rise of large regional and national systems, loss of autonomy is one of the biggest changes CEOs face. The new CEO must be able to function in an environment of collaborative decision-making with peers as well as within reporting relationships to system experts in such areas as clinical quality, finance, supply chain and operations.
“Hospitals have always been vertically organized into departments: cardiology, radiology, pathology. Now that hospitals are becoming health systems, they have to have not only these vertical structures, they are creating horizontal structures,” Geffner says. This is known as matrix management, common in such other fields as engineering and aeronautics, where multiple disciplines work together to execute complex projects.
Facility and regional CEOs operating within a larger system need to understand the boundaries in which they operate, which can vary a lot. Some systems give local CEOs broad goals and leave it up to them to create a culture that can achieve them. Increasingly, though, systems are highly prescriptive in how local operations are structured, down to specifying physician preference items, as well as clinical pathways for entire episodes of care. Adhering to such pathways is critical to maintaining quality through rigorous process control, and achieving maximum economies of scale.
Such protocols generally are developed collaboratively, with lots of opportunity for local input. Even so, they tend to cast the local CEO in an operating rather than strategic role. “This is a tough issue that hundreds of CEOs face right now. If you look a decade out, there will be very few independent hospital leaders,” Geffner says.
In 2010, Scripps Health adopted a matrix system across its four hospitals and 19 outpatient clinics, making managers responsible for cost and quality across the system. The goal was to identify best practices and standardize them systemwide.
“Initially, I think everyone thought I was crazy,” Van Gorder acknowledges. “The hospital CEOs didn’t like it much that they weren’t going to be kings of the castle anymore and they had to collaborate with the other CEOs. ... Five years later, the result was $350 million in cost savings without layoffs. They have seen the value and now they believe in it.”
At CHI, senior management roles at the national, local system and facility levels are integrated, says Rowan. Locally, leadership is formally divided between the CEO who heads the regional health system, and presidents who head individual hospitals.
The regional health system CEO is responsible for building out the entire continuum of care, including hospital, home care, post-acute, rehab and primary care, as well as creating physician networks that include both employed and independent practitioners. Their brief also includes articulating strategy and operating the entire system to maximize value for CHI and the communities it serves. Regional CEOs report to Rowan in the national office.
Market presidents are responsible for operating one or more inpatient facilities as efficiently as possible within the integrated network. Presidents also are responsible for connecting elements within the system to increase the effectiveness of care delivery and population health management, and for representing the system in the local community. They report to the regional CEO.
Candidates for regional CEO generally have significant experience operating complex health organizations, as well as strategic planning and risk contracting. “It doesn’t hurt to have some time on the payer side,” Rowan says. Presidents need five years or more of facility management experience along with the ability to build and lead accountable management teams, and manage outcomes.