Something has changed in hospital and health system board members' attitudes toward the institutions they govern. In my interactions over the last few months, I've seen a sharpening of concern as well as a simmering uneasiness about the executives they have entrusted to lead their organizations.
What's behind that change? Maybe it's the confluence of health care reform and economic turmoil. But perhaps even more so, it's the fundamental restructuring of health care reflected in the thousands of physicians who have left private practice to accept salaries from hospitals. Taken together, these things are causing board members to look at their executives through new eyes and wonder whether they are well-matched to the challenges of what seems a transformed environment.
Board leaders with whom I've recently worked have shared concerns that fall into seven categories. They worry about their CEO's ability to:
- Relate effectively with physicians;
- Marry medicine and management;
- Conceptualize and lead a complex health system;
- Maintain a reasonable connection with the communities and organizations they serve;
- Earn credibility;
- Provide strategic leadership; and
- Demonstrate results that matter.
Relating Effectively with Physicians
More board members are coming into regular contact with physicians on issues that matter, such as quality, expenses and information technology. They've begun to recognize that progress related to any of the most significant challenges facing their institutions will require the constructive involvement of physicians across a wide variety of specialties and settings, not just officers of the medical staff.
An obvious question inevitably arises. Who will organize and lead physicians toward higher levels of quality and affordability? Increasingly, board members are failing to see such potential in their current CEOs. And they've begun to recognize that the need to relate effectively with physicians is so fundamental it can't be delegated away by the CEO to a chief medical officer, vice president of medical affairs or the president of a subsidiary group practice. Relating productively with physicians is the core of a CEO's responsibilities. The importance of this responsibility has become even more apparent as board members have seen the number of physicians on the payroll swell into the hundreds.
Some astute board members fear there is a ticking time bomb that will require a deft touch to defuse. That bomb is the employment agreements reached with physicians over the past few years. Many of these agreements will prove economically unsustainable in the future. Too much has been promised and too little expected. Many CEOs appear to be either unaware of the specifics of these agreements or are praying they can retire before the clock ticks down. Savvy board members are asking questions and getting answers that fall short.
As a professional class, physicians can be difficult to lead or even influence. But, an inordinate amount of energy in many executive suites seems to go toward dwelling on the shortcomings of physicians, while too little goes toward recognizing their strengths. Indeed, in some executive teams, discomfort relating to physicians has become so ingrained as to be pathological. Having been subjected to many an executive rant about the difficulties of relating with physicians, I've found myself often thinking and occasionally saying, "You, my friend, have chosen the wrong profession." How, after all, can any executive hope to build an advantage in quality and affordability if he or she exhibits a palpable dislike for the physicians who deliver the care?
To be fair, many physicians embody an intrinsic lack of trust and respect for administrators, but that doesn't relieve an executive team from the obligation to engage physicians in a constructive and productive way. After all, it is the executive's job to figure out a way to lead despite challenges and obstacles. It is not the physician's job to do so.
Marrying Medicine and Management
Some have concluded that only physician executives will have the clinical knowledge to lead complex health systems in the future, particularly when it comes to demonstrating an advantage in quality and affordability. And some have suggested that it will take a physician to appreciate the nuances of physician personality and culture that increasingly will shape tomorrow's health systems.
I think both points are correct, but it may not be necessary that the CEO position be occupied by a physician. What will be necessary is a combination of clinical and management experience. Currently, that combination is hard to find in a single person. Lay executives trained and experienced in traditional fashion usually have little clinical exposure. Without experiencing medical school, residency and the practice of medicine, they aren't likely to have a meaningful understanding of the clinical realities or professional dynamics.
On the other hand, physicians with MBAs often lack the understanding and wisdom that time in a leadership role delivers. While lay executives continue to underestimate the importance of "physician leadership," physicians often fail to fully appreciate the value of "professional management."
Those organizations that have reached true world-class stature, including Mayo Clinic, Cleveland Clinic and Johns Hopkins, have recognized the importance of physician leadership and professional management by embodying them in two executives: a physician paired with an experienced executive in a partnership of mutual respect. At Hopkins Medicine, Ed Miller, M.D., CEO and dean, and Ron Peterson, executive vice president, have forged such a partnership. The Miller-Peterson partnership stands as a shining example to the rest of health care.
Much has been written about the inherent problems associated with co-leadership approaches. Indeed, there are few examples of co-CEOs working in sustainable fashion. But in most situations where such a co-leadership model has been attempted, the co-CEOs have brought similar backgrounds to the table.
The promise and the power of the physician-lay executive model is that each leader contributes something unique. But in the end, one person must hold ultimate authority. I think it will be possible for that one person to be either a physician or a lay executive. Over time, the still-rare physician with seasoned executive experience will become more common. But even then, boards will need to be cautious. There are a significant number of physicians who have spent the preponderance of their careers in nonclinical roles. Recruiting a physician with management experience doesn't provide absolute protection against hiring a bureaucrat who may not earn the respect of colleagues still active in delivering care to patients.
Conceptualizing and Leading a Complex Health System
Many CEOs gained experience within a traditional hospital environment or, more specifically, an inpatient environment. Furthermore, they rose along a career track that emphasized operations. Experience in hospital operations is important, but it provides too limited a perspective for full development of a seasoned and balanced CEO.
Most hospitals still operate like manufacturing plants, delivering products designed by others for customers whose needs often remain abstractions. Although they have evolved, most hospitals continue to be organized and operated much as they were 50 years ago. As many hospitals grew by adding or acquiring other hospitals, they often relabeled themselves as "health systems." The implication was that they had become something fundamentally different from what they were before. In some cases, the new label may have been appropriate.
In Virginia, for example, Norfolk General Hospital became Sentara Health, a multi-enterprise organization that included not only hospital operations, but a large health plan and a growing cadre of salaried physicians. Other organizations like Intermountain Healthcare have followed a similar path, while Mayo Clinic, Cleveland Clinic and Geisinger have preserved and enhanced the integration of care that has set them apart since their founding. But for many other organizations the path to systemness has been paved with hard lessons.
Those that attempted to move beyond inpatient operations to include physician practices, outpatient ventures and health plans often realized they were dealing with distinctive enterprises, each with its own unique operating system, economic engine and culture. Most of the organizations that tried to operate these varied enterprises relying on their inpatient experience and infrastructure soon beat a hasty retreat to their traditional hospital business.
The CEOs of the future won't have the luxury of retreat. They'll need to orchestrate multiple enterprises systematically, each with its own distinctive business model. Systems in name will need to become systems in fact. As systems expert Russell Ackoff once observed, the challenge of leadership in a system involves managing "interactions" rather than "actions," and it requires leaders who can see and communicate things whole. Some board members have grown concerned that system capabilities seem notably absent in many executive suites today.
Maintaining a Reasonable Connection with Communities and Organizations
Many board members have seen the communities they represent battered by recession. The economic struggle is widespread and many are suffering. Amid this reality, some board members have developed a quiet but growing frustration with executives who feel compelled to push relentlessly for compensation that seems out of sync in a crumbled economy. When compensation emerges as an issue, I've been surprised by the ferocity of board concern. It's not the kind of thing board members often talk about openly, but a preoccupation with compensation that has come to dominate their interaction with executives feels unbalanced and unseemly to them.
Many board members are small-business people. They have direct experience with the ravages of an economy turned dark and uncertain. And they know the impact of recession on incomes, including their own. Other board members are entrepreneurs. They know what risk looks like and often don't see enough of it in hospital management to justify outsized compensation packages.
Criticism has grown as physicians, employees, community leaders and politicians have discovered executive compensation numbers embedded in hospital Form 990s. Board members are not immune to the noise such criticism creates.
In nonprofit organizations, executive compensation levels once retained a definable connection to that of front-line employees. Today, CEOs of even relatively small health systems display little hesitation when justifying seven-figure compensation packages. They and their compensation consultants caution that it takes a competitive salary and benefits package to attract and retain talent. Unfortunately, some board members are becoming convinced that compensation packages considerably less than $1 million will attract a long line of hungry and motivated talent.
At Hopkins, CEO and Dean Ed Miller, M.D., emphasizes the importance of being physically present throughout his organization. He doesn't travel much. Indeed, Miller often can be found in the hallways interacting with faculty, employees and patients. That the leader of America's most highly rated health care institution would take such a stance is telling, particularly given the extent to which many CEOs and executive teams in less-revered institutions remain invisible within their organizations.
I have heard frustration from board members, physicians and employees about top executives too often missing in action—gone to conferences or helping to make policy while their organizations languish; frustration, too, with many executives' apparent reluctance to be visible out where their organizations create value—at the interface between caregivers and patients—as if the real work of the organization took place in meeting rooms.
Many executive teams are uncomfortable outside the executive suite. Even the theatrics of orchestrated "rounding" is unlikely to deliver the authenticity needed to lead with credibility. It is far too easy and common for an executive to park in the deck, enter the executive suite and never come within shouting distance of a nurse, doctor, operating room or emergency department.
Board members can accept some responsibility for this. Too often they allow their executive teams to expend inordinate amounts of time managing board relationships. I know of several organizations in which "board week" is preceded by a week preparing for board week, then followed by another week dedicated to responding to board week—three weeks every month essentially sucked up by board meetings. Interestingly enough, few of the board members I've talked with feel that all the attention heaped on them is particularly useful. Many have admitted they are, frankly, overwhelmed and exhausted by a routine that has grown into an unproductive monster.
Providing Strategic Leadership
Executives have an obligation to be more than managers. Executives are expected to think and act strategically. As they move up the ladder, their scope expands. So should their view. An executive should have a greater ability to deal with complexity and ambiguity. Executives should be able to communicate a picture that is connected and whole—a picture in which others can see how they fit and what is expected of them. It is the ability to lead others from a point in the present to a point in the future in the face of uncertainty and resistance that defines the difference between an executive and a manager—a leader and an operator.
In the past, when resources were relatively abundant, hospitals and health systems could get by with simply operating. In an environment where resources increasingly will be scarce and the need to demonstrate differentiated value ever more critical, boards are beginning to expect more from their executives.
Too many hospital executives leave their strategic thinking to others, always looking for somebody else's recipe rather than rolling up their sleeves and staying in the kitchen. Developing accountable care organizations provides an example. Because accountable care organizations are minimally defined, developing an ACO provides an opportunity for an executive team to conceptualize its own model and strategies. Instead, too many already are busy trying to mimic organizations that claim to have figured it out already.
Demonstrating Results That Matter
Executive accountability resides in two related spheres. The one that gets the most attention in boardrooms is performance tied to such indicators as revenues, expenses, utilization and FTEs. The other sphere, which far too rarely is addressed in establishing executive accountability, is accomplishment. Some board members have begun to wonder whether executives should be held accountable not only for performance, but also for the accomplishments that generate performance. Having asked,"What is most important for us to accomplish?" they've started to ask the follow-up question, "Have we accomplished what we said we would?"
Strategic plans are intended to identify the most important things to accomplish and how an organization intends to accomplish them. Far too often after the final strategic planning retreat, the plan is set aside and board members fail to require their executive teams to apprise them of their accomplishments. Some board members have begun to feel they've been sandbagged by executives who hold themselves accountable only for performance, much of which may have been achieved accidentally or was based on targets intentionally set low.
Some accomplishments are more important than others. The past decade has been characterized by an impressive boom in hospital building and renovation; much of it was sorely needed. But even such tangible accomplishment can mask lack of accomplishment in the intangibles that matter—things like information technology, communications, infection control and teamwork. Constructing facilities qualifies an executive to be a construction manager. It is not the complex, technology-based, people-intensive, relationship-dependent work that should dominate the agenda of a CEO.
I've had the pleasure of working with many superb health care CEOs and executives who are extremely capable in each of the areas described previously. And their boards know it. To a great extent, the grumbles I've heard recently from board members have come as a surprise. They've surfaced as passing comments in private conversations but then, in some instances, manifested themselves later as firestorms that have scorched executives and their organizations. Of course, it's possible that the board members with whom I've talked are outliers and their circumstances are unique. Maybe the grumbles portend nothing; then again, maybe not.
Dan Beckham is the president of The Beckham Company, a strategic consulting firm based in Bluffton, S.C. He is also a regular contributor to H&HN Daily.
The opinions expressed by authors do not necessarily reflect the policy of Health Forum Inc. or the American Hospital Association.