Preparing Physician Executives for Health System Leadership
By Andrew Epstein, M.D.
“Our biggest constraint to success in the future is our need for effective physician leaders.”
That sentiment has been expressed by nearly all hospital and health system executives as their organizations evolve from administratively led businesses that provide clinical care, to integrated clinical enterprises that are led and managed successfully as businesses. This poses a challenge for both health system executives and physicians.
Before health systems focus on developing a new wave of physician executives, they need to determine the enterprise leadership and management design and then, within that design, the leadership role, authority and accountability of physicians. They also should anticipate how the health systems’ physician leadership will change over time. A key question here is how physicians will be integrated into the system five years from now. For example, does your health system expect to have all employed physicians, all independent, or a mixture – and how will that affect the extent of physician leadership authority and the number and types of physician executives you will need?
Until now, we have been compensated primarily for units of work rather than the outcome of that work. Health systems and physician practices were successfully operated primarily through administrative means. If a hospital wanted to improve its financial performance, the focus was on increasing efficiency with initiatives such as improved revenue-cycle management, streamlined supply chain and purchased services, or more efficient corporate services. But as greater emphasis is placed on outcome-based determinations of safety, quality, service and efficiency, health systems and practices must be both effective and efficient administratively and clinically. A new breed and a deeper bench of physician executives will be needed as healthcare continues its transformation from our traditional activities-based reimbursement system to an outcomes-based system emphasizing patient-centered, safe, high-quality, accessible and affordable care that achieves the Triple Aim – improving the experience of care, improving the health of populations, and reducing per capita costs of healthcare.
In our experience, 50 to 60 percent of financial improvement in a typical health system today is based in traditional operational and administrative functions. The remaining 40 to 50 percent must come from improvements deep in the delivery of care: Who needs to be in the hospital? What procedures are performed? What tests and how many consultations are ordered? How long does a patient need to stay? As hospitals and systems become more efficient administratively, the proportion of potential financial improvement that must be achieved will grow in clinical care through improvements in safety, quality and efficiency. This work will be led by physicians in collaboration with operations, nursing, care managers and others whose work touches patients and their care.
These physician executives will serve in new roles and will need new capabilities, authority and accountability. In particular, they will need to be well versed both in hospital and ambulatory operations. They also will need to be knowledgeable about evidence-based practice that reduces inappropriate clinical variation and the undesirable safety, quality, service and financial outcomes that result. To be successful, they will need to honor the tradition of professional autonomy while at the same time establishing, and enforcing, clinical standards that are at the heart of the profession and the scientific evidence. Hospital executives cannot accomplish this deep physician work alone. At the same time, physician executives need the collaboration of others to hardwire the best practices into daily operations, the electronic health record, and standard reporting and improvement.
What’s needed in physician executives?
Physician executives must be respected by their peers for clinical excellence. Even very talented physicians from outside the market can struggle when named to major leadership roles simply because they lack credentials as a local practicing physician. The best candidates also may not be interested. In a leadership development and succession study conducted in 2005, I found that those doctors who existing executives identified as having the best leadership potential often were interested only in being good doctors – while those who expressed the greatest interest in leadership roles lacked the confidence of the existing executives.
In healthcare, the Mayo Clinic is the gold standard for commitment to leadership development. Under its structured approach, many potential physician executives are identified and participate in a structured four-stage leadership development process. They advance only after they have completed their course responsibilities and proven mastery of their current leadership responsibilities. Leadership succession at Mayo is all but guaranteed. According to Drs. Leonard Berry and Kent Seltman in Management Lessons from Mayo Clinic, “Mayo Clinic’s senior executives have few worries about the next generation of Clinic executives, including physician executives. In fact, two generations of future executives are mostly on campus today, and they are being deliberately readied for senior leadership positions.” Most health systems lack the tradition and resources of the Mayo Clinic, but every organization can (and must) get started by involving more physicians in organizational and strategic planning work, new management roles for ongoing operations and value-based outcomes that are needed – and educating, training and mentoring them and rigorously evaluating their performance.
Learning by Doing: Practical Model of Physician Leadership Development
Navigant has worked with many organizations that have embarked on this journey. They have focused physician involvement in strategic planning and new accountable roles in collaborative leadership of care delivery. For example, in Atlanta, Piedmont Healthcare has found a number of effective channels for physician involvement in strategic planning.
We also have helped reorganize physician leadership at dozens of hospitals and health systems by designing a collaborative physician-operations leadership model, the Clinical Operating Council, to manage the services, service lines and operational areas in the hospitals. In addition to the physician executive of each area, four to six other physicians participated along with colleagues from nursing, operations, pharmacy, care management and other units. These councils are responsible for market development, patient care outcomes, effective and efficient physician practice, excellence in nursing work life, the care and compassion experienced by patients and their families, and innovation. The physician-administrative partners also participate on an integrated leadership team – the Medical Operations Team – that governs the hospital. This new model has demonstrated improvements in market growth, clinical outcomes, efficiency, and patient, nurse and physician satisfaction in many hospitals and systems.
Physicians on the integrated leadership team quickly learn how the hospital works – its anatomy and physiology – and become effective stewards of its mission. However, we have often seen clinically excellent physicians flounder when appointed to accountable leadership role, for two reasons. First, they may assume that their role is to promote stability when, in fact, their role may be more important in provoking instability with innovation and breakthrough improvement in today’s rapid-paced and highly competitive environment. Second, when placed in leadership roles physicians who confidently introduce serious interventions in their patients because they understand how the human body works, often are timid in committing to organizational interventions because they do not understand the anatomy and physiology of the organization. They are unsure how the parts are related and how they affect each other – and what will happen as a result of their decision. Physician executives achieve a breakthrough in confidence and authoritative decision making when they can predictively understand the impact of their decisions on the organization.
Doing the Right Thing for Patient Care and Organizational Performance
In addition to understanding how the organization works, physicians need to develop the ability to move the agenda forward with their colleagues as well as hospital leadership and staff. We focus on connecting the physician’s experience in patient care to their new responsibilities in management with the concept of “Influence Without Authority,” described in the leadership guide by Allan R. Cohen and David L. Bradford. Physicians are authoritative and trusted advisors in patient care, but unless the patient is anesthetized or comatose, they produce results that are only as good as their ability to influence the patient to do the right thing for their care. We call this compliance. Research has demonstrated that patient compliance is dramatically higher when the patient rates the physician at the highest level of trust and personal connection: “My doctor understands me and my concerns as well as my medical problem.” Navigant works with physician executives to bridge their clinical experience of influencing patients to do the right thing for their care to influencing colleagues to do the right thing for patient care and organizational performance. The more new physician executives or those with expanded responsibilities can connect their clinical success to management success, the faster they will be able to contribute to clinical and organizational outcomes. This ability is a critical asset to succeed in overcoming the daunting change-management challenges that face healthcare organizations as they respond to market forces and healthcare reform.
These insights are critical when preparing physicians for roles in leading change. It is instructive to remember how physicians learn to practice medicine: intensive education, demanding apprenticeship, and watchful coaching by more experienced physicians, with progressive independence as proficiency is demonstrated. We call this progression, “See one, do one, teach one.” We have found that the same model works when teaching physicians to be effective executives, starting with excellent education programs offered by groups such as the American College of Physician Executives and the Institute for Healthcare Improvement, as well as university-based MBAs in healthcare, among other programs.
The collaborative physician-administrative or nurse partnership model, described above, enables physicians to learn from more experienced organizational executives from other disciplines, and supports a team-based approach to care through apprenticeship. This is true whether in ongoing management of the clinical area or in project work to address constraints to excellence in care and organizational performance. The physicians’ partners, however, must understand that part of their role is to mentor the physicians; the physicians, conversely, must accept the mentoring as part of their learning. The development of physician executives also must become part of the responsibility of the physician executive (including vice presidents of medical affairs, chief medical officers and chief clinical officers), with formal education, mentoring and continuing development. In addition, Navigant frequently has been asked to provide mentoring to physicians in new roles. In one example, we advised an academic medical center in Boston on its primary care strategy and have served as an ongoing mentor and coach for implementation. The quickest way to learn is by being observed closely to find the teachable moment.
Balancing Act: Optimizing Current Practice While Stimulating Innovation
In today’s environment, healthcare systems must be profitable in the still-current fee-for-service world while simultaneously preparing for a value-based future. Physician executives will be required to contribute to this transformation and, to be successful, they will need to develop muscles they’ve not used before. They must be able to find flaws in the current system while also engaging other physicians in analyzing, experimenting, designing, piloting, evaluating and changing – in incremental, but steady forward motion. Today, they must operate in an environment where “heads in beds” are being reimbursed but where the environment is moving quickly to value-based payment models such as shared savings, bundling and new forms of capitation. This will require a level of focus on the actual process of care, including adherence to best practices, even in the face of the tradition of physician autonomy. Physician executives must be effective both in optimizing current practice while stimulating innovation in evidence-based practice.
Leading this balancing act will not be easy. As hospitals have migrated into health systems, we have created organizations that are not organized and cannot be managed as before. Physician executives from the earlier era often lack the skills, disciplines and habits needed in this new environment. For health systems, determining the type and extent of new physician leadership needed now – and in the future – is essential to navigate the increasing integration of physicians and health systems. These physician executives must share the health systems’ vision for the future – and just as passionately embrace that vision. They must understand and value the changes ahead, and over time engage their colleagues to follow their lead, for they are leaders only if they have followers.
About the Andy Epstein
Andy Epstein, M.D., is a Navigant managing director with more than 40 years of healthcare industry experience. He directs consulting engagements for the leaders of university and community hospitals, integrated health systems, faculty practices and large physician groups. Andy’s work focuses on organizational design, physician leadership effectiveness and hospital-physician relationships and structures. He speaks nationally about strategy, physician-hospital collaboration, enterprise and physician governance models and change management. He has a bachelor’s degree from Dartmouth College and an M.D. from the School of Medicine at Case Western Reserve University. Contact Andy at firstname.lastname@example.org or 781.514.1900.